FEDERAL COURT OF AUSTRALIA

Henke v Carter [2002] FCA 492

PRACTICE AND PROCEDURE – allegation that respondents in contempt of order of Court – whether respondents issued subpoena for examination contrary to order of Court – where applicants seeking to re‑litigate matter previously dealt with by judge of Court – abuse of process – no basis for motion – no basis for claim against second respondent.

COSTS – indemnity costs against applicants – whether special or unusual feature – motion untenable and misconceived – motion abuse of process.

Federal Court Act 1976 (Cth):  s 43

IAN SIDNEY HENKE & ORS v BRUCE JAMES CARTER & ANOR

V 1166 of 2001

GOLDBERG J

10 APRIL 2002

MELBOURNE

THE COURT ORDERS THAT:

1.         The application by Ian Sidney Henke, Lance Stewart Miller, and Robyn Diane Coningham by way of notice of motion filed on 9 April 2002 is dismissed.

2.         The applicants, Ian Sidney Henke, Lance Stewart Miller and Robyn Diane Coningham, pay the costs of the first respondent and the second respondent of and incidental to the said motion, and of the respondents’ motion filed on 10 April 2002.  Such costs are to be taxed on the basis, in each case, that the costs include all costs except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, each of the said respondents is completely indemnified by the said applicants for their costs.

3.         Liberty is reserved to all parties to apply for such further or other orders as they think fit.

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

REASONS FOR JUDGMENT

1                     On 18 October 2001, Registrar Carey in Adelaide made a number of separate orders pursuant to ss 596A and 596B of the Corporations Act 2001 (Cth) (“the Act”) that nine specified persons be summonsed to attend before the Court to be examined in respect of the examinable affairs of Institute of Taxation Research Pty Ltd (in liquidation) (“the company”).  Those named persons were Noel Waters, Zoltan Varszeghy, Marleen Elva Broadley, Leane Kluyt, Lance Miller, Francis Coningham, Walter Joosse, Robyn Coningham and Ian Henke.  Thereafter summonses were issued, directed to each of those nine persons to attend before the Court for examination.

2                     On 9 November 2001, Ian Sidney Henke, Lance Stewart Miller, Robyn Diane Coningham and Francis John Coningham, being four of the nine persons the subject of the separate orders of Registrar Carey, filed a document entitled “Notice of Appeal” in the Court which purported to be a notice of appeal against the orders made against them on 18 October 2001.  The notice was directed to Bruce Jones Carter, the liquidator of the company and Finlaysons, a firm who I understand to be the solicitors who have been acting and continue to act for the liquidator.  The notice of appeal was expressed in the following terms:

“On Appeal from Orders by Registrar Carey in the Federal Court at Adelaide.

a.         The Appellants hereby lodge Notice of Appeal against the whole of the Orders made by Registrar P.V. Carey in the Federal Court of Australia at Adelaide on 18 October 2001 in the matter of the Institute of Taxation Research Pty Ltd (in Liq.).”

3                     The matter came on for initial hearing before Gray J on 17 December 2001 and for final hearing on 4 February 2002.  His Honour could not find any provision in the Corporations Act or Regulations under which there was a right of appeal from the orders of the Registrar.  Ultimately, his Honour treated the matter before him, with the agreement of the parties, as a review of the Registrar’s decisions as provided by r 16.1(2) of the Corporations Rules.  The matter before him was in effect – and he treated it as – a rehearing de novo. 

4                     On 14 March 2002, Gray J made orders, in substance, that the District Registrar of the South Australian District Registry issue summonses pursuant to s 596A of the Corporations Act, calling upon the four nominated appellants in the proceeding before him, Ian Sidney Henke, Lance Stewart Miller, Robyn Diane Coningham and Francis John Coningham, to attend before the Court for examination. 

5                     On 9 April 2002, Ian Sidney Henke, Lance Stewart Miller and Robyn Diane Coningham, but not Francis John Coningham, filed a motion in the Court directed to Bruce James Carter, the liquidator of the company and Finlaysons.  The motion moved the Court for the following orders:

“1.       That the Respondents be required to attend the Court to show cause why they should not be dealt with for contempt of the Orders of His Honour Justice Gray dated 14 March 2002, in that they have issued a subpoena to Marlene [sic] Elva Broadley for examination on 11 April 2002 contrary to the particulars of the Order.

2.         That the Respondents be required to provide to the court evidence that they can comply with the provisions of the order of His Honour Justice Gray dated 14 March 2002 in relation to the funding of expenses for examinations from company assets, there being no provision in the Order for funding from any other source.

3.         That in the absence of compliance as required by Section 2 of this Notice of Motion that all subpoenas issued pursuant to the order of 14 March 2002 be stayed until the orders are complied with or evidence is provided that the Orders can be complied with.

4.         That in the absence of such proof that the subpoenas be struck for failure to comply with the orders of the court.

5.         Such further orders and directions as this Honourable Court may deem fit.”

6                     I have heard submissions this afternoon on behalf of the three nominated applicants for relief and on behalf of the respondents.  I have reached a clear conclusion as to the disposition of the motion.  The claim in relation to Marleen Elva Broadley, that is the allegation or claim that there has been a contempt committed by the respondents specified in the motion, is misconceived.

7                     The order made in relation to Marleen Elva Broadley on 18 October 2001 by Registrar Carey was not the subject of the purported notice of appeal filed by Ian Sidney Henke, Lance Stewart Miller, Robyn Diane Coningham and Francis John Coningham, nor was it the subject of the review and de novo hearing conducted by Gray J.  When one examines the document which initiated that process, that is the notice of appeal filed 9 November 2001, and also when one examines the judgment and reasons of Gray J, it is apparent that the proceeding before him was confined to the orders which related to Ian Sidney Henke, Lance Stewart Miller, Robyn Diane Coningham and Francis John Coningham.

8                     The applicants before the Court today submitted that in fact what was before Gray J was an appeal from all the nine orders made by Registrar Carey on that day and they pointed to the passage in the notice of appeal, that they lodged the notice of appeal against “the whole of the Orders” made by the Registrar.  However, on its proper construction that document related only to the subject matter in respect of which the four nominated appellants to whom I have referred were entitled to appeal.  Each of them had the standing to seek review of the decision and order made by the Registrar pursuant to r 16.1(2) of the Federal Court (Corporations) Rules 2000.

9                     There were nine separate orders and the person who was the subject of each of those orders had a right of review in respect of the order which named him or her.  However, none of them had a right of review in relation to the orders made in respect of the other persons.  In any event, it is apparent from the reasons and judgment of Gray J that he was only dealing with and only purported to deal with, the orders by way of review which he made against Ian Sidney Henke, Lance Stewart Miller, Robyn Diane Coningham and Francis John Coningham.

10                  The consequence is that the order made by Registrar Carey on 18 October 2001 in relation to Marleen Elva Broadley was not the subject of review pursuant to the Federal Court (Corporations) Rules, nor has it been the subject of any other collateral attack or proceeding.  That order stands and it must be complied with.  It is not contrary to, or inconsistent in any way with, the orders made by Gray J on 14 March 2002.  The orders made by his Honour on that day did not touch or concern in any way the order made on 18 October 2001 in relation to Marleen Elva Broadley.

11                  There is a further basis upon which the relief sought in par 1 of the notice of motion was misconceived.  It referred to the fact that the respondents had issued a subpoena to Ms Broadley contrary to the particulars of the order of Gray J.  There was no evidence of any subpoena issued to Ms Broadley unless what was intended was a reference to the earlier order of the Registrar on 18 October 2001.  If it was a reference to that order, for the reasons to which I have referred, the relief sought was misconceived.

12                  The claim in relation to the relief sought in paragraph 2 of the notice of motion is similarly misconceived for three basic reasons.  First, the issue of whether the respondents were required to provide evidence that they could comply with the provisions of the order of Gray J in relation to the funding of expenses for examinations from company assets was dealt with by Gray J in his reasons for judgment.  In particular, that issue was dealt with in par 22 of his Honour’s reasons.  His Honour in that paragraph referred to the fact that the purported notice of appeal and one of the affidavits suggested that par 10 of each order of the Registrar whereby the costs were directed to be paid out of the assets of the company was demonstrably false because of the fact that the company had no assets.

13                  His Honour dealt with the situation in relation to the position of the assets of that company and concluded that what was before him then could not be taken to be a final statement that the company had no assets.  His Honour then continued:

“Even if it could, it is difficult to understand how an order for the payment of costs out of the assets of a company in liquidation, being a routine order in proceedings related to the winding-up, could be an indication of an ulterior purpose on the part of the liquidator in seeking orders for examination.”

What the applicants on the motion were seeking to do, in effect, was to re‑litigate the issue which had been raised before Gray J.  That matter had been the subject of consideration by his Honour and, in my view, any attempt to re‑litigate the matter was in substance to raise a matter which had been foreclosed in his Honour’s reasons.  The respondents submitted in substance that that matter was the subject of a res judicata, and they referred to Rogers v R (1994) 181 CLR 25.  However, I think the matter is more appropriately described as an issue estoppel by reference to the well known authorities in that area.  But be that as it may, whichever be the proper basis for consideration, the matter had been dealt with by Gray J.

14                  Secondly, the order which his Honour made on that day which was in the following terms:

“The liquidator’s costs of and incidental to the preparation and service of each such summons, and of each such examination be paid out of the assets of the Institute of Taxation Research Pty Ltd (In Liquidation)”,

was an enabling order.  It gave the liquidator the opportunity to recover his costs of the proceeding and the examinations out of the assets.  That is a matter for the liquidator.

15                  In any event, the liquidator placed material before the Court showing that he was being provided with indemnities in relation to his costs from the major creditor of the company, the Australian Tax Office, and that he had obtained approval to those indemnities pursuant to the provisions of s 477(2B) of the Act from the Court.

16                  Thirdly, I can see no basis for the exercise of any jurisdiction to make the order which is sought in par 2 of the notice of motion.  As I have said earlier, the matter was dealt with by Gray J.  If it was thought that the order made by his Honour was inappropriate or should have been in a different form, that was more appropriately to be dealt with by way of appeal against his Honour’s order.  No such appeal has been brought.  I can see no jurisdictional basis or power that I have on the hearing of this notice of motion to make the orders sought in par 2 of the notice of motion.

17                  In the course of submissions, the applicants relied on other proceedings which have occurred and are pending in this Court and elsewhere, including appeals, in relation to the company and in relation to the progress and process of the liquidation of the company.  The applicants on the motion submitted that the issues in these other proceedings crossed over into, and were interlinked with the present proceeding, in relation to issues which arose out of Registrar Carey’s orders of 18 October 2001 and Gray J’s order of 14 March 2002.

18                  It was submitted that I should, in effect, grant a stay of Gray J’s order because of the nature of those proceedings.  I reject that submission.  I can see no basis for granting a stay of Gray J’s order in relation to any of the matters which were referred to in argument in relation to those other proceedings.  The issues raised by the applicants in the notice of motion are confined and can be resolved without reference to those other proceedings.  In particular, I am not concerned on the hearing of this motion, and on the consideration of the relief sought, to have regard to, and to consider and evaluate, the conduct of the liquidation by the liquidator.

19                  For all of these reasons I am satisfied that there was no basis at all for the motion which was filed and that the motion should be dismissed.  In particular there was no basis for the claim against the second respondent, the firm Finlaysons.  Indeed, there was no basis for joining that firm at all in the initial notice of appeal which became the review before Gray J.  All the relief which was sought in that proceeding related to orders sought, and made, for and on behalf of the liquidator. 

20                  Towards the end of the applicants’ submissions, the applicants accepted that this was the position in relation to Finlaysons, that there was no basis for the proceeding brought against them by the notice of motion.  The applicants did not then seek to continue against Finlaysons.  In effect, they sought to withdraw the proceeding against Finlaysons.  That withdrawal must carry with it a costs order against the applicants.

21                  The respondents have filed a notice of motion seeking indemnity costs in relation to the costs of the applicants’ notice of motion and have also sought costs personally against the applicants’ solicitors in that motion.  The jurisdiction generally to grant such orders in relation to costs is found in s 43 of the Federal Court Act 1976 (Cth).  I consider that this is a case for the payment of indemnity costs.  The cases establish that the usual order for costs is that party and party costs should be awarded unless the circumstances warrant a departure from the usual course because the justice of the case requires it or because there is some special or unusual feature or factor in the case:  Colgate‑Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Re Wilcox, Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151.

22                  I consider that the application by notice of motion was wholly untenable and misconceived.  There was no basis for it.  In my view that is a special feature which warrants an order for the payment of indemnity costs.  In effect, the notice of motion and the form in which it was brought was an abuse of the process of the Court:  Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Deputy Commissioner of Taxation v Levick (1999) 168 ALR 383 at 390.

23                  In the course of submissions, the respondents indicated that if an order was made for indemnity costs against the applicants they would not press their claim for costs personally against the solicitor for the applicants.  In those circumstances, I do not need to consider, nor is it appropriate to consider, whether or not in the circumstances of this case any order for costs should be made against the solicitor for the applicants.

24                  The order of the Court will be as follows:

1.           The application by Ian Sidney Henke, Lance Stewart Miller and Robyn Diane Coningham by way of notice of motion filed 9 April 2002 is dismissed.

2.           The applicants, Ian Sidney Henke, Lance Stewart Miller and Robyn Diane Coningham pay the costs of the first respondent and the second respondent of and incidental to the motion, and of the respondents’ motion filed 10 April 2002.  Such costs are to be taxed on the basis, in each case, that the costs include all costs except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, each of the said respondents is completely indemnified by the said applicants for their costs.

3.           I will reserve liberty to apply if there is a problem in the course of tomorrow.

Associate:

Dated:              19 April 2002