Australian Forest Managers Ltd v Bramley, R V & Ors [1996] FCA 197

CATCHWORDS

COSTS - Court's discretion to order costs against non-party - whether power to order costs against a liquidator of a company where proceeding brought in name of company in liquidation - whether proceeding "under" the Corporations Law - relationship between Federal Court of Australia Act 1976 (Cth) s 43 (2) and Corporations Law s 1335 (2).

CORPORATIONS LAW - proceedings "under" the Corporations Law - costs - Court's discretion to order that the costs be borne by such "party" as the Court directs - whether power to order costs against a liquidator of a company where proceeding brought in name of company in liquidation - relationship between s 1335 (2) of the Corporations Law and s 43 of the Federal Court of Australia Act 1976.

Corporations (New South Wales) Act, 1990 (NSW) s 42.

Corporations Act 1989, s 56.

Corporations Law s 1335.

Federal Court of Australia Act 1976, s 43.

Re Wridgemont Display Homes Pty Ltd (1992) 39 FCR 193

Egankarra Pty Ltd v Vince (1992) 2 ACSR 463

Health & Life Care Ltd v South Australian Asset Management Corporation (1995) 13 ACLC 1148

AUSTRALIAN FOREST MANAGERS LIMITED (IN LIQUIDATION) v ROGER VANET BRAMLEY & ORS

No NG 3099 of 1994

Lindgren J

Sydney

22 March 1996

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY) No NG 3099 of 1994

GENERAL DIVISION )

IN THE MATTER OF: AUSTRALIAN FOREST MANAGERS LIMITED (IN LIQUIDATION)

AUSTRALIAN COMPANY NO: 003 359 411

BETWEEN:

AUSTRALIAN FOREST MANAGERS LIMITED (IN LIQUIDATION) ACN 003 359 411

Applicant

AND:

ROGER VANET BRAMLEY

First Respondent

BRIAN ALEXANDER SMIBERT

Second Respondent

GRAHAM BRADSHAW HOUSTON

Third Respondent

JENNIFER MARGARET SMIBERT

Fourth Respondent

CORAM: Lindgren J

PLACE: Sydney

DATE: 22 March 1996

MINUTE OF ORDERS

THE COURT:

1. (a) Orders that the first and third respondents have leave to file in Court an amended notice of motion.

(b) Orders that the amended notice of motion be returnable instanter.

(c) Notes that the parties agree that the amended motion is to be determined on the basis of the evidence and
submissions on the motion of the first and third respondents brought by notice of motion filed on 16 November 1995.

2. (a) Orders that the second and fourth respondents have leave to file in Court an amended notice of motion.

(b) Orders that the notice of motion be returnable instanter.

(c) Notes that the parties agree that the amended motion is to be determined on the basis of the evidence and submissions on the motion of the second and fourth respondents brought by notice of motion filed in Court on 6 March 1996.

3. Orders that the proceeding be stood over to Friday 29 March 1996 at 9.30 am for the making of orders, including orders as to costs, in conformity with the Reasons for Judgment of Lindgren J dated 22 March 1996.

4. Directs that the parties provide to the Associate of Lindgren J, by 5.00 pm on Thursday 28 March 1996, an agreed form of short minutes of the orders to be made (including orders to be made as to costs) and if agreement has not by then been reached, the forms of short minutes of the orders for which they will respectively contend and brief outlines of the submissions to be made in support of those respective forms.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY) No NG 3099 of 1994

GENERAL DIVISION )

IN THE MATTER OF: AUSTRALIAN FOREST MANAGERS LIMITED (IN LIQUIDATION)

AUSTRALIAN COMPANY NO: 003 359 411

BETWEEN:

AUSTRALIAN FOREST MANAGERS LIMITED (IN LIQUIDATION) ACN 003 359 411

Applicant

AND:

ROGER VANET BRAMLEY

First Respondent

BRIAN ALEXANDER SMIBERT

Second Respondent

GRAHAM BRADSHAW HOUSTON

Third Respondent

JENNIFER MARGARET SMIBERT

Fourth Respondent

CORAM: Lindgren J

PLACE: Sydney

DATE: 22 March 1996

REASONS FOR JUDGMENT

NATURE OF PROCEEDINGS

There are before the Court for determination two motions: one brought by the first and third respondents and the other brought by the second and fourth respondents. They seek relevantly identical orders. In the motion of the first and third respondents, these are expressed as follows:

"1. That the herein proceedings be dismissed pursuant to 0.28 r 5.

2. That Richard Andrew Gagie of Gagie & Nicholls, First Floor, MLC Building, Gurwood Street,
Wagga Wagga, New South Wales 2650, the Liquidator of the Applicant, pay the First and Third Respondents' costs of these proceedings and this Motion on an indemnity basis including any reserved costs and any costs payable to the First and Third Respondents by the Applicant pursuant to any orders already made in these proceedings.

3. Alternatively to order 2 above an order that the said Liquidator pay the First and Third Respondents' costs in such manner as to this Court seems fit.

4. That the Applicant be stayed from taking any further steps in these proceedings or from commencing any fresh proceedings against the First and Third Respondents arising out of or relating to the proceedings herein until such time as all costs orders made in these proceedings in favour of the First and Third Respondents have been paid."

In view of para 2, it is odd that the two notices of motion were expressed to be addressed to all of the parties to the proceedings but not to the non-party liquidator. The hearing of the motions proceeded on the basis that they were brought against "the Liquidator" and counsel announced his appearance on behalf of "the Liquidator" and said that he treated the motions as brought against "the Liquidator".

But the evidence revealed a problem. The order for winding up of Australian Forest Managers Ltd (I will call the applicant in its pre-liquidation form "AFM") made on 16 December 1991 by the Supreme Court of New South Wales appointed "Richard Andrew Gagie of 1st Floor, MLC Building, Gurwood Street, Wagga Wagga", liquidator. That was that office of Gagie & Nicholls, Chartered Accountants. Within that office Christopher Mel
Chamberlain has had the carriage of the administration of the liquidation from 16 December 1991 to date. This proceeding was commenced on 24 March 1994. On 2 March 1995 Mr Gagie ceased to be liquidator and the next day, 3 March 1995, Stephen Alan Jay, a partner in the same firm, became liquidator in his place. (According to a letter from the solicitors for the applicant, Mr Gagie had "retired from the partnership" in about September 1993!) It can be seen that Mr Gagie was the liquidator of the applicant for about the first year of the life of this proceeding and Mr Jay has been its liquidator for about the last year. (According to a letterhead in evidence, the firm subsequently had a change of name from "Gagie & Nicholls" to "Nicholls & Co" and Mr Chamberlain became at some stage, perhaps the same stage, a partner of Mr Jay's, but this seems to be immaterial.) Mr Chamberlain has sworn an affidavit in opposition to the respondents' motion. Neither the original liquidator, Mr Gagie, nor his successor, Mr Jay, has filed any affidavit in the proceeding.

When counsel announced on 22 February 1996 that he appeared for "the Liquidator", did he refer Mr Gagie, the person against whom an order was sought in the notice of motion, or to Mr Jay who has been the liquidator since 3 March 1995? The answer was unclear. I would not have made the order sought that "Richard Andrew Gagie ... the Liquidator of the Applicant" pay any costs because Mr Gagie is no longer "the Liquidator". In any event, the words "the Liquidator of the Applicant" are apt to confuse by suggesting that liability is to be limited by reference to the property of the applicant available to the liquidator.

I would not have ordered Mr Gagie to pay the respondents' costs in respect of the period after 2 March 1995 because he was not the liquidator responsible for the conduct of the litigation after that date. I would not have ordered Mr Jay to pay any of the costs because no order was sought against him. Even if one had been, I would not have ordered him to pay the respondents' costs in respect of the period before 3 March 1995 because he was not the liquidator responsible for the conduct of the litigation prior to that date.

These threshold procedural difficulties led me to have the motions re-listed on 13 March 1996 when I raised them with the parties. The respondents subsequently applied for leave to file amended notices of motion addressed to, inter alia, Messrs Gagie and Jay seeking orders that Mr Gagie and Mr Jay pay the respondents' costs for the respective periods for which they were liquidators. The filing of the amended notices of motion has been consented to. The parties have agreed that I am to proceed to determine the motions on the basis of the original evidence and submissions and on the basis that counsel's appearance was for both Mr Gagie and Mr Jay. As it transpires and as will later appear, in view of the conclusion which I reach below little if anything has turned on the inappropriateness of the form of notices of motion as originally filed.

ISSUES ARISING ON THE MOTIONS

The parties treated the issues arising on the motions as being the following:

First Issue:

Is the proceeding a proceeding "under" the Corporations Law of New South Wales ("the Law") for the purpose of sub-s 1335 (2) of the Law?

Second Issue:

If "yes" to the First Issue, does this have the effect of depriving the Court of the power which, it is common ground, it would otherwise have under s 43 of the Federal Court of Australia Act 1976 ("the FCA Act") to order that the costs of the proceeding be paid by a non-party?

Third Issue:

If "no" to either the First Issue or the Second Issue, should the Court in the exercise of its discretion order Mr Gagie or Mr Jay or both, and if both in what amounts or proportions, to pay the costs of the respective respondents, and if so should it make an order for costs

(a) on an indemnity basis; or

(b) on the usual party/party basis?

It was common ground that the applicant had not provided security for the respondents' costs as it was ordered to do on 25 August 1995. The applicant accepted that it was not in a position to provide the security and advanced no reason why the proceeding should not be dismissed. Accordingly, there will be an order of dismissal, subject to any special order on the present motions, and an order that the applicant pay such of the respondents' costs as it has not been ordered to pay by orders previously made.

Section 43 of the FCA Act provides relevantly as follows:

"43(1)..., the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.

(1A)............................................

(2)Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge."

The parties rightly accepted the general proposition that s 43 empowers the Court to order a non-party to pay the costs of proceedings before the Court; cf Re Wridgemont Display Homes Pty Ltd (1992) 39 FCR 193 (Jenkinson J) ("Wridgemont"); Caboolture Park Shopping Centre Pty Ltd (in Liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 (FCA/FC); Australian Securities Commission v Aust-Home Investments Pty Ltd (1993) 11 ACSR 539 (FCA/Hill J); Oz B and S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128 (FCA/Einfeld J); Re Bendeich (1994) 126 ALR 643 (FCA/Drummond J); and see similar holdings in relation to generally similar sections in Knight v FP Special Assets Ltd (1992) 174 CLR 178 and Bent v Gough (1992) 36 FCR 204 (FC).

Sub-section 1335 (2) of the Law provides as follows:

"(2) The costs of any proceeding before a court under this Law shall be borne by such party to the proceeding as the court, in its discretion, directs."

(It is common ground that the Law, that is to say, the Corporations Law of New South Wales, is the applicable Corporations Law.)

The expression "court" is defined in sub-s 58AA (1) of the Law to mean in the Law "any court when exercising the jurisdiction of this jurisdiction." In the present case, "court" in sub-s 1335 (2) is a reference to any court when exercising the jurisdiction of the State of New South Wales. The argument accepted that in the present case this was a reference to this Court. The critical question raised by the First Issue was therefore whether the proceeding fitted the description of a proceeding "under" the Law for the purpose of sub-s 1335 (2).

Three sub-issues arise in respect of the Second Issue. The first is whether the words "any other Act" in sub-s 43 (2) of
the FCA Act are apt to refer to the Law, having regard to the fact that the Law forms part of an Act of the Parliament of New South Wales, namely the Corporations Act 1989 (NSW). A second sub-issue, related to the first, is whether, even if not, sub-s 1335 (2) otherwise prevails over the exercise of the discretion given by s 43 of the FCA Act. A third sub-issue is whether, in any event, the words "Except as provided by" are satisfied by sub-s 1335 (2) of the Law.

History of the proceeding

The application was filed on 24 March 1994. It was headed "In the Matter of Australian Forest Managers Limited (in Liquidation) - Australian Company Number 003 359 411" and bore the words "Application under s 232 of the Corporations Law." In both respects there was an attempt to comply with O 71 rr 4 and 5 and Forms 4 and 5, which are applicable, relevantly, to documents filed in "proceedings arising under the Corporations Law" and to applications filed to commence proceedings "in the Court's original jurisdiction arising under the Corporations Law" (emphasis supplied). Of course this shows no more than that a legal representative of the applicant took the view that the proceeding arose under the Law.

The application sought the following relief:

"1. an order that the Second and Fourth Respondents account to the Applicant for any moneys he, she or they have received pursuant to the Payment [sic];

2. damages against the First, Second and Third Respondents in the amount of $41,000.00;

3. interest;

4. costs."

The application was accompanied by a statement of claim. Although an amended application and an amended statement of claim were subsequently filed on 12 September 1994, the observations which I am about to make on the documents originally filed are equally applicable to their amended versions. I disregard a form of further amended statement of claim which was in evidence but which was never filed.

The statement of claim pleaded that the first, second and third respondents ("the Directors") were at all material times directors of and controlled AFM, and that at all material times they and the fourth respondent were shareholders in AFM. It pleaded that the Directors, in breach of the obligation of honesty imposed on them by sub-s 232 (2) of the Law and of the obligation of care and diligence imposed on them by sub-s 232 (4) of the Law, on or about 6 May 1991 agreed to sell certain property to the second and fourth respondents for $41,000; that on 27 June 1991 the Directors resolved to pay to the second and fourth respondents jointly the proceeds of sale; and that on 3 July 1991 the Directors settled the sale and made that payment to the second and fourth respondents ("the Payment"), in consequence of which AFM suffered loss and damage of $41,000 being the amount of the proceeds of the sale.

In my view, it could hardly be clearer that the proceeding as against the Directors was a proceeding "under" the Law. The Law imposed in sub-ss 232 (2) and (4) the legal obligations alleged not to have been observed by them. It provided in sub-s 232 (8) for AFM to recover "compensation" if a profit had been made out of the contravention or if the corporation had suffered loss or damage as a result of the contravention. The fact that the applicant used the word "damages" rather than the word "compensation" in its application does not prevent the proceeding, in so far as it is brought against the Directors, from being a proceeding "under" the Law.

The basis of the liability of the fourth respondent was not distinctly pleaded. Since it was not pleaded that she had been an officer or employee of the AFM, it is not so obvious that the proceeding as against her was one "under" the Law. But at least it is clear on the pleading that contravention of s 232 by the Directors was an essential part of whatever cause of action was intended to be relied on against her.

In summary, the cause of action as pleaded against three of the four respondents is one created by the Law and that cause of action is an essential part of the case intended to be made against the fourth respondent. In these circumstances I have no doubt that the proceeding is one "under" the Law for the purpose of sub-s 1335 (2) of the Law. I need not stay to consider other and different situations such as multiple claims against the one respondent, some (in particular a minority) under the Law and others not, and multiple respondents against only one or some (in particular a minority) of whom a claim is made under the Law.

I return to the history of the proceeding. By notice of motion filed on 29 August 1994, the second and fourth respondents moved the Court for a dismissal or permanent stay on the basis that no reasonable cause of action was disclosed. On 12 September 1994 I granted the applicant leave to file an amended application and statement of claim, ordered it to pay the second and fourth respondents' costs of the motion and otherwise dismissed the motion.

On 12 September 1994, the applicant filed its amended application and amended statement of claim.

The first and third respondents by one motion filed in Court on 28 October 1994, and the second and fourth respondents by another motion filed in Court on 4 November 1994, sought dismissal or a permanent stay on the one hand or a striking out of certain paragraphs of the amended statement of claim on the other hand. On 8 November 1994 I ordered that the applicant have leave to amend, that the applicant pay the respondents' costs of the two motions, and reserved to the respondents leave to argue on a future occasion that the order for costs should be supplemented by an order that "the liquidator" personally pay those costs. At the time no-one referred to the fact that there had been a change in the identity of the liquidator.

On 9 December 1994 the first and third respondents filed a notice of motion for an order that the applicant provide security for their costs, that until the security was given the proceeding be stayed, and that in default of the security being given the proceeding be dismissed as against the first and third respondents. On 8 June 1995 the second and fourth respondents filed a notice of motion seeking similar orders. On 25 August 1995 I ordered, by consent, that the applicant furnish security of $15,000 for the costs of the first and third respondent and of $15,000 for the costs of the second and fourth respondents, in each case within eight weeks from 25 August, and that until the security was given the proceeding be stayed. I also ordered the applicant to pay the costs of the respective respondents as moving parties on the two motions for security.

The applicant did not provide security for any part of the sum of $30,000 within eight weeks from 25 August 1995 or at all. On 31 August 1995 the liquidator's office wrote to creditors reporting on developments and in particular asking them whether they were willing to participate in the provision of the security. The letter was signed "C M Chamberlain for Stephen Jay - Official Liquidator". The letter expressed the opinion that the Directors had used their position to gain an advantage over ordinary unsecured creditors and had contravened s 232 of the Law. The letter reported that a proceeding had been "commenced against all parties within the Federal Court of Australia with all but a hearing date now to be set". Apparently the letter was the first occasion on which creditors were informed of the litigation. The letter concluded by advising that if there was no positive response within four weeks, the proceeding in the Court would lapse and the administration would be finalised. There was no response from creditors.

The present notice of motion of the first and third respondents was filed on 16 November 1995 and that of the second and fourth respondents was filed in Court in the course of the hearing.

(1) FIRST ISSUE:

"Is the proceeding a proceeding 'under' the Corporations Law of New South Wales ('the Law') for the purpose of sub-s 1335 (2) of the Law?"

For reasons given earlier, I answer this question "Yes".

(2) SECOND ISSUE:

"If 'yes' to the First Issue, does this have the effect of depriving the Court of the power which, it is common ground, it would otherwise have under s 43 of the Federal Court of Australia Act 1976 ('the FCA Act') to order that the costs of the proceeding be paid by a non-party?"

As noted earlier, the second issue involves sub-issues.

The opening words of sub-s 43 (2) of the FCA Act "Except as provided by any other Act" signify "Except as provided by any other Act [of the Commonwealth Parliament]"; cf Acts Interpretation Act 1901 sub-ss 38 (1), (3). The Law is enacted as part of s 82 of the Corporations (New South Wales) Act 1989, an Act of the New South Wales Parliament. It follows that sub-s 1335 (2) of the Law is not referred to by the expression "any other Act" in sub-s 43 (2) of the FCA Act.

In Wridgemont, Jenkinson J addressed the present issue. His Honour referred to the facts that it was the Corporations Law of Victoria under which the matter before him arose; that it was the Corporations (Victoria) Act 1990 (Vic) by which jurisdiction was conferred on the court in respect to that matter; and that that conferral of jurisdiction was authorised by sub-s 56 (2) of the Corporations Act 1989. His Honour concluded that the jurisdiction must be exercised in conformity with sub-s 1335 (2) of the Corporations Law of Victoria which, his Honour considered, limited the persons whom the Court might order to bear costs of a proceeding to persons who were parties to the proceeding.

In Wridgemont two creditors of a company in liquidation sought an order that two individuals who were the shareholders of the company and who had been, at relevant times, its directors, pay certain costs of creditors of the company which the company had been ordered to pay. Jenkinson J considered that O 71 r 10 enabled him to obviate "the obstacle which s 1335 (2) presents to the exercise of the jurisdiction of the Court over costs against a person not a party to the proceeding" ((1992) 39 FCR 193 at 196). Order 71 sub-r 10 (4), in effect and so far as relevant, empowers the Court to order that an officer of a body corporate be added as a respondent to proceedings under the Corporations Law. The expression "officer" is defined in O 71 sub-r 2 (1) to have, in relation to a body corporate, the same meaning as the expression is given in s 9 of "the Corporations Law"; s 9 defines "officer" to have the meaning given to that term by s 82A; and s 82A defines "officer" in a way that does not include a court-appointed liquidator. Accordingly, the power given by O 71 sub-r 10 (4) which was available to Jenkinson J in Wridgemont is not applicable in the present case.

What is important for present purposes is that Jenkinson J considered that but for the availability of O 71 sub-r 10 (4), the jurisdiction conferred on the Court by sub-s 42 (3) of the Corporations (Victoria) Act 1990 (Vic) with the authority of sub-s 56 (2) of the Corporations Act 1989 carried with it, and was subject to, the terms of sub-s 1335 (2) of the Corporations Law of Victoria.

Sub-section 42 (3) of the Corporations (New South Wales) Act 1990 (NSW) provides as follows:

"42(3) Jurisdiction is conferred on the Federal Court with respect to civil matters arising under the Corporations Law of New
South Wales."

Paragraph 56 (2) (a) of the Corporations Act 1989 provides as follows:

"56(2) The Federal Court ... may:

(a) exercise jurisdiction (whether original or appellate) conferred on that Court by a law of a State corresponding to this Division with respect to matters arising under the Corporations Law of a State;"

It is artificial and impermissible, in my view, to construe these provisions as conferring jurisdiction in proceedings with respect to "matters arising under" the Law, unaccompanied by the provision contained in sub-s 1335 (2) of the Law with respect to the costs of "any proceeding ... under [the] Law." The provision of sub-s 1335 (2) is an inseverable part of the grant of jurisdiction. Accordingly, with respect, I think that the construction adopted by Jenkinson J in Wridgemont was correct. I do not need to consider whether his Honour's construction is one which, in any event, as a judge sitting at first instance, I must follow unless convinced that his Honour was plainly wrong.

The respondents referred to Health & Life Care Ltd v South Australian Asset Management Corporation (1995) 13 ACLC 1148 (SA/FC). In that case the Full Court of the Supreme Court of South Australia dismissed an appeal from, inter alia, an order made by Debelle J that liquidators personally pay the costs of a successful party. The ground of the appeal in this respect does not appear in the report. However, the Full Court noted that Debelle J had had power to make the order against the liquidators although they were not parties, citing (at 1156) Knight v F P Special Assets Ltd (1992) 174 CLR 178 and s 40 of the Supreme Court Act 1935 (SA) (sub-s 40 (1) is in terms relevantly similar to sub-ss 43 (1) and (2) of the FCA Act). The issue arising from sub-s 1335 (2) of the Corporations Law was not referred to, perhaps because the proceeding was not conceived of as one "under" the Corporations Law. I do not regard the decision of Debelle J (reported at (1995) 13 ACLC 552, though not on the question of costs) or that of the Full Court, as authorities on the question before me.

The respondents also submitted that in the alternative to the Court's being granted the necessary power to order the liquidator to pay their costs in the circumstances of this case by s 43 of the FCA Act, the Court had that power by reason of sub-s 477 (6) or sub-s 536 (1) of the Law or of a supervisory power which it has over officers of the Court.

Sub-section 477 (6) of the Law is as follows:

"477 (6)The exercise by the liquidator of the powers conferred by this section is subject to the control of the Court, and any creditor or contributory, or the Commission, may apply to the Court with respect to any exercise or proposed exercise of any of those powers."

The only power conferred by s 477 which is presently relevant is the power given to a liquidator by para 477 (2) (a) to "bring ... any legal proceedings in the name and on behalf of the company." Sub-section 536 (1) of the Law is relevantly as follows:

"536 (1)Where:

(a)it appears to the Court ... that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing:

(i) a requirement of the Court; or

(ii) a requirement of this Law, of the regulations or of the rules; or

(b)a complaint is made to the Court ... by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties:

the Court ... may inquire into the matter and, where the Court ... so inquires, the Court may take such action as it thinks fit."

The predecessors in the Companies (Victoria) Code of these two sub-sections were relied on before Fullagar J in the Supreme Court of Victoria in Engankarra Pty Ltd v Vince (1992) 2 ACSR 463. His Honour had before him a summons by a company which had successfully applied for a dismissal of three earlier successive applications by a company in liquidation to have it wound up. On each occasion the company in liquidation had been ordered to pay the company's costs. By the summons the company as plaintiff sought an order that the liquidator personally pay the costs.

Fullagar J held that leaving aside the two provisions with which I am presently concerned (the counterparts before his Honour were sub-ss 377 (5) and 420 (1) of the Companies (Victoria) Code), the Supreme Court had had no jurisdiction in the earlier proceedings to order the non-party liquidator as distinct from the party company in liquidation to pay the costs of those proceedings. In saying this, his Honour did not refer to sub-s 533 (2) of the Companies (Victoria) Code which was in the same mandatory terms as sub-s 1335 (2) of the Law and to which apparently his Honour was not referred. Rather, his Honour founded upon general principle, citing Re Wilson Lovatt & Sons Ltd [1977] 1 All ER 274 (Oliver J). In the light of the series of cases to which I referred earlier, the general proposition must now be accepted that provisions such as s 43 of the FCA Act do confer jurisdiction to order a non party to pay costs (the approach taken by Fullagar J was criticised by Black CJ in Bent v Gough (1992) 36 FCR 204 (FC) at 209).

Fullagar J observed that "whether the present application ... is put under s 377 (5) or under s 420, it is clear that the court has a discretion" (at 466), noted as mentioned above, the lack of jurisdiction to make an order against the liquidator in the earlier proceedings brought by the company in liquidation, then continued as follows:

"In my opinion, therefore, if there is jurisdiction in myself to order that the costs be paid by the liquidator personally of these finalised proceedings, it must be found in the Code, and I think the Court ought in view of this dictum [a reference to Oliver J in Re Wilson Lovatt & Sons Ltd, supra] be reluctant to order in the present case payment by the liquidator personally." (at 467)

His Honour concluded that he should exercise his discretion against ordering the liquidator to pay costs.

Sub-section 1335 (2) of the Law is mandatory as to the order for costs to be made in this proceeding "under" the Law. If the Court has jurisdiction to make a relevant order against either of the liquidators under sub-s 477 (6) or sub-s 536 (1) the order must be in the general nature of an order that the liquidator exonerate or indemnify the company in liquidation or put it in funds and should, if not must, be the subject of a distinct "proceeding" against the liquidator.

Sub-section 477 (6) of the Law relevantly makes a liquidator's power to bring any legal proceedings in the name and on behalf of the company subject to the control of the Court. It provides that a contributory may "apply to the Court with respect to" any exercise of that power. The respondents qualify as contributories in relation to the applicant. In my view the provision does not, on its proper construction, empower a court at the conclusion of proceeding to make an order in that proceeding that the liquidator pay personally the previously incurred costs of the parties against whom the liquidator exercised the power to bring the proceedings in the name and on behalf of the company. In the alternative, the general provision of sub-s 477 (6) yields to the specific provision of sub-s 1335 (2) which is inconsistent with the making of an order of that kind in a proceeding under the Law.

I turn now to sub-s 536 (1) quoted earlier. This provision contemplates that there be an "inquiry" by the Court, and in the case of para 536 (1) (b), a prior "complaint". The procedure of inquiry by the Court differs from the procedure on motion which has been followed in this case. In the present case no "complaint" was ever formulated and the Court did not settle the terms of any "inquiry" by it. It may be that if the Court were conducting an inquiry as contemplated by the section, the terms of the inquiry as determined by the Court would have been substantially different from the terms of the costs orders framed by the respondents in their motions. Similarly, the exculpatory material placed before the Court by either liquidator might have been substantially different from the evidence in fact adduced in response to the evidence led by the respondents on their motions. Even if the words "such action as it thinks fit" in sub-s 536 (1) empower the Court after inquiry to make orders of the kind sought in the present motions, it would not be procedurally fair to the liquidators to reconstruct, notionally and retrospectively as an inquiry under sub-s 536 (1), the proceeding which has taken place on the motions.

The submission that the Court had the requisite power as part of a supervisory power which the Court has over its officers was not developed. Whatever may be the nature and scope of such a power, I doubt that it extends to requiring a court officer to bear a litigant's costs of a proceeding which is completed but for dismissal. In any event any such general power must be read subject to the terms on which jurisdiction is granted in relation to a matter. As noted earlier, in the present case those terms include the specific mandatory provision relating to costs found in sub-s 1335 (2) and, it may be added, the terms of sub-ss 477 (6) and 536 (1) of the Law. I am not persuaded that after allowing for the scope of these provisions there is a residual supervisory power in the Court enabling me to make the orders sought on the respondents' motions.

The respondents submit that in order for the opening words of sub-s 43 (2) of the FCA Act "Except as provided by any other Act" to be satisfied, the "other Act" must go further than does sub-s 1335 (2) of the Law. As I observed earlier, the opening words refer to an Act of the Commonwealth Parliament and the limitation contained in sub-s 1335 (2) becomes relevant by reason of its being an aspect of the jurisdiction granted. Nonetheless, the respondents' submission must be rejected as a matter of construction in any event.

The terms of sub-s 1335 (2) of the Law are mandatory: once a proceeding before a court is seen to be one "under" the Law, sub-s 1335 (2) requires the costs of the proceeding to be borne by a party or parties. The court's discretion relates only to how the costs are to be so borne. Such terms are inconsistent with an exercise of the power given by s 43 of the FCA Act to order a non-party to pay costs. The excepting words in sub-s 43 (2) of the FCA Act are apt to refer to, inter alia, a provision of such a nature.

Subject to one matter, it follows from all that precedes that I should dismiss the motions on the ground that the Court lacks power to make the orders sought. The matter to which I refer is this: counsel for the second and fourth applicants indicated on the hearing that his clients might wish to contend that s 78B of the Judiciary Act 1903 is applicable. Accordingly the proceeding will be listed for a date after the parties have had an opportunity to study these Reasons so that this matter can be dealt with, or, if appropriate, orders can be made dismissing the motions and the proceeding and providing for costs not covered by orders previously made.

3. THIRD ISSUE:

"If 'no' to either the First Issue or the Second Issue, should the Court in the exercise of its discretion order Mr Gagie or Mr Jay or both, and if both in what amounts or proportions, to pay the costs of the respective respondents, and if so should it make an order for costs

(a) on an indemnity basis; or

(b) on the usual party/party basis?"

In view of the conclusion reached above, it is not necessary for me to consider the Third Issue in relation to either liquidator. However, it seems appropriate to make some observations.

One of the criticisms made by the respondents of the liquidators is that they abdicated their responsibilities with the result that Mr Chamberlain has been able, at will, to launch the present (according to them, groundless) proceeding. The nature of the relief sought in the respondents' motions, the absence of any affidavit from either liquidator and the positive evidence of the continuous control of the liquidation by Mr Chamberlain combine to give rise to some concern.

On the other hand, Mr Chamberlain has sworn a lengthy and detailed affidavit explaining the circumstances in which the proceeding was begun and carried on. In particular, he deposes to difficulty which he has experienced in understanding the subject transactions by reason of a failure of AFM to comply with s 289 of the Law in relation to the keeping of accounting records. It should be understood that he still maintains that the applicant has a right to relief against the respondents and says that the application will have to be dismissed for no other reason than that the applicant cannot provide security for costs.

Although it is unfortunate that there was no consultation with creditors by either liquidator prior to the making by consent of the order for security for costs on 25 August 1995, it must be borne in mind that sub-s 477 (2) of the Law empowers a liquidator to bring and prosecute proceedings in the name and on behalf of the company in liquidation without the necessity of consultation with creditors.

A further matter relevant to discretion is that the respondents earlier chose to follow the course of making applications for summary dismissal or permanent stay or striking out rather than applying for security for costs. Once they applied for and obtained an order for security, the proceeding came to an early halt. The Directors, at least, are taken to have known of the applicant's lack of funds. All four respondents are taken to have been willing to litigate on the basis that orders for costs in their favour would be enforceable only against the applicant, that is to say, only to the extent of the funds available in the liquidation. These matters constitute a further discretionary consideration to be taken into account in favour of the liquidators and against the respondents on the motions.

In sum, although it has not been necessary for me to express a final view, it seems appropriate to record that unless further consideration persuaded me otherwise, I would have declined to make orders against the liquidators on discretionary grounds.

CONCLUSION

The proceeding will be listed for a date for the making of orders in conformity with the foregoing Reasons.

I certify that this and the preceding 25 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

Associate:

Dated: 22 March 1996

Heard: 22 February, 6, 13 March 1996

Place: Sydney

Decision: 22 March 1996

Appearances: Mr D A C Robertson of counsel instructed by Walsh & Blair appeared for the former liquidator Richard Andrew Gagie and the liquidator Alan Jay.

Mr M Gorrick of counsel instructed by W J Kell appeared for the 1st and 3rd respondents.

Mr M Anderson of counsel instructed by Wallace de Garis & Co appeared for the 2nd and 4th respondents.

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