FEDERAL COURT OF AUSTRALIA

Xat Ky v Australvic Property Management Pty Ltd (No 2) [2007] FCA 1785

COSTS – costs orders against a non-party – discretion to award indemnity costs – entitlement of ASIC as an intervener to costs orders

Corporations Act 2001 (Cth), s 466(2)

Australian Guarantee Corp Ltd v De Jager [1984] VR 483 applied

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 applied

Knight v FP Special Assets Ltd (1992) 174 CLR 178 applied

Symphony Group Plc v Hodgson [1994] QB 179 applied

Ugly Tribe Company Pty Ltd v Sikola [2001] VSC 189 applied

White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 cited

IN THE MATTER OF AUSTRALVIC PROPERTY MANAGEMENT PTY LTD (ACN 113 858 021)

XAT KY AND SIV CUNG HENG v AUSTRALVIC PROPERTY MANAGEMENT PTY LTD (ACN 113 858 021)

VID 210 OF 2007

MIDDLETON J

22 NOVEMBER 2007

MELBOURNE

IN THE MATTER OF AUSTRALVIC PROPERTY MANAGEMENT PTY LTD

(ACN 113 858 021)

THE COURT ORDERS THAT:

1.                  The plaintiffs’ costs of the proceeding (including the hearing before Registrar Mussett) be taxed:

(a)                on a party/party basis up to and including the hearing of 11 July 2007;

(b)               thereafter on an indemnity basis of and in connection with the hearings after 11 July 2007,

and reimbursed in accordance with s 466(2) of the Corporations Act 2001 (Cth).

2.                  The plaintiffs be entitled in respect of their costs to be paid out of the security provided pursuant to orders made by the Court on 29 May 2007.

3.                  ASIC’s costs of the proceeding be costs in the winding up and taxed on a party/party basis.

4.                  Saxbys’ costs of the notice of motion filed by Australvic Property Management Pty Ltd on 24 July 2007 and of the notice of motion filed by Saxbys on 28 August 2007 be costs in the winding up and taxed on an indemnity basis.

5.                  T & G Welding’s costs of the proceeding (including the hearing before Registrar Mussett) be costs in the winding up and taxed:

(a)                on a party/party basis up to and including the hearing of 11 July 2007;

(b)               thereafter on an indemnity basis of and in connection with the hearings after 11 July 2007.

6.                  R & A Cab Co Pty Ltd’s costs of the proceeding (including the hearing before Registrar Mussett) be costs in the winding up and taxed:

(a)                on a party/party basis up to and including the hearing of 11 July 2007;

(b)               thereafter on an indemnity basis of and in connection with the hearings after 11 July 2007.

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

IN THE MATTER OF AUSTRALVIC PROPERTY MANAGEMENT PTY LTD

(ACN 113 858 021)

REASONS FOR JUDGMENT

1                     Upon ordering the winding up of Australvic Property Management Pty Ltd (‘APM’) on 5 October 2007, I ordered that each party, each supporting creditor, the Australian Securities and Investments Commission (‘ASIC’) and Saxbys Lawyers (‘Saxbys’) file with the Court and serve on each other written submissions as to costs and that leave be granted to the liquidator (if so advised) to file with the Court and serve on each party, each supporting creditor, the ASIC and Saxbys, any written submissions as to costs. 

2                     Pursuant to these orders I have received written submissions from the plaintiffs, T & G Welding Pty Ltd (‘T & G Welding’) (a supporting creditor), ASIC, and Saxbys.

The Plaintiffs

3                     The plaintiffs sought the following orders:

·                    The plaintiffs’ costs be taxed and reimbursed in accordance with s 466(2) of the Corporations Act 2001 (Cth) (‘the Corporations Act’);

·                    The plaintiffs’ costs of the hearing before Registrar Mussett be taxed and reimbursed in accordance with s 466(2) of the Corporations Act;

·                    Mr Brian Leslie Fisher (‘Mr Fisher’) pay the costs thrown away by reason of the setting aside of the order made on 3 July 2007;

·                    There be no order as to costs for the hearing on 6 July 2007; and

·                    Mr Fisher pay the costs incurred in relation to the hearings after the conclusion of the hearing on 11 July 2007.

4                     It is appropriate that costs should follow the event, and I will order that the plaintiffs’ costs of the proceeding (including the hearing before Registrar Mussett) be taxed and reimbursed in accordance with s 466(2) of the Corporations Act.

5                     I will further order that the plaintiffs be entitled in respect of their costs to be paid out of the security provided pursuant to orders of the Court made on 29 May 2007. 

6                     In view of the history of the application made on 3 July 2007 and the events on 6 July 2007, I propose to make no specific orders as to costs in relation to the hearings on 3 July 2007 and 6 July 2007.  Those costs will be part of the orders I already propose to make in relation to the proceeding generally.  I observed that reserve costs are dealt with in the Federal Court Rules (see O 62 r 15).

7                     The plaintiffs requested that Mr Fisher be ordered to pay the costs incurred in relation to the hearings after the conclusion of the hearing on 11 July 2007 (on the principles set out in Knight v FP Special Assets Ltd (1992) 174 CLR 178) because:

(1)               a considerable portion of time was wasted on the application to remove Saxbys which application was without merit;

(2)               the application for leave to reopen APM’s case was seeking an indulgence and was without merit. 

8                     It was contended that Mr Fisher’s conduct was unreasonable in the sense used by Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 in that:

(1)               the applications were hopeless;

(2)               Mr Fisher conducted and managed the proceeding in disregard of any proper consideration of the prospects of success; and

(3)               no practitioner who was reasonably well-informed and competent would have so acted.

9                     The application by APM to re-open was permitted on a limited basis, although the application by APM to remove Saxbys was unsuccessful.  However, I am not satisfied that it is appropriate in the context of the applications made on behalf of APM or in the conduct of the proceedings generally, that I should make a cost order directly against Mr Fisher.  I do not consider that Mr Fisher’s own conduct has been demonstrated to be so unreasonable, or even that if the application against Saxbys was obviously without merit, that a costs order against Mr Fisher would be appropriate.  I appreciate that Mr Fisher (as the director of APM) was granted leave to appeal the decision of Registrar Musset, but the hearing was to be treated de novo to consider the solvency of APM.

10                  Further, I am not satisfied that the interests of justice require an order to be made against Mr Fisher where costs can be accommodated in accordance with the statutory regime or as part of the costs in the winding up – see generally Knight v FP Special Assets Ltd (1992) 174 CLR 178 and Symphony Group Plc v Hodgson [1994] QB 179 at 191-192 per Balcombe LJ. 

11                  I consider that the plaintiffs (and, for that matter, those supporting the plaintiffs’ application), having brought their application on the basis of a failure to comply with a statutory demand, should be reimbursed in accordance with s 466(2) of the Corporations Act (or as part of the costs in the winding up). 

12                  I do, however, consider that there was a considerable loss of time, inconvenience to the parties and the Court, and a wilful disregard to established law in the attempts to re-open the case (other than on the limited basis permitted) and in the application for a restraining order against Saxbys – see generally Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 401; Ugly Tribe Company Pty Ltd v Sikola [2001] VSC 189; Australian Guarantee Corp Ltd v De Jager [1984] VR 483 at 502. 

13                  Whilst I do not consider it appropriate to order Mr Fisher to pay these costs, the Court is warranted in making orders to prevent as far as possible the plaintiffs from being out of pocket.  I propose to order, therefore, that in relation to the hearings after the hearing of 11 July 2007, the plaintiffs’ costs be taxed on an indemnity basis and reimbursed in accordance with s 466(2) of the Corporations Act.

T & G Welding

14                  T & G Welding sought orders that its costs of the proceeding (including the costs of the hearing on 12 June 2007) should be:

(a)        costs in the winding up; and/or

(b)        paid by Mr Fisher,

in each case on an indemnity basis, alternatively on a solicitor and own client basis.

15                  For the reasons given above in relation to the submission of the plaintiffs that Mr Fisher should pay costs, I reject the similar contention put on behalf of T & G Welding.

16                  However, I accept that T & G Welding, as a supporting creditor, should be entitled to its costs in the winding up. 

17                  In addition to making submissions similar to the plaintiffs’ about the events which occurred after the hearing on 11 July 2007, T & G Welding also submitted that because of the conduct of APM during the proceedings generally (particularly its tardiness in filing material as ordered by the Court and its abandonment of certain evidence), the costs to be ordered in favour of T & G Welding should be ordered on an indemnity or solicitor and own client basis. 

18                  I am prepared to do so in relation to the costs of and in connection with the hearings after the hearing on 11 July 2007 for the reasons given above.  However, I do not consider that it is appropriate to otherwise order indemnity costs or costs on a solicitor and own client basis, despite the series of events accurately described in the written submissions of T & G Welding. 

19                  In view of the nature of APM, its business activities, its involvement in other litigation and the state of its financial records, I cannot be satisfied without more that APM had involved itself in this part of the proceedings in sufficiently unmeritorious, deliberately high-handed or otherwise improper conduct so to as warrant the order sought by T & G Welding.

ASIC

20                  ASIC sought its costs of this proceeding.  ASIC intervened in this proceeding pursuant to s 1330 of the Corporations Act.  A costs order could be granted in its favour should the Court so exercise its discretion. 

21                  In normal circumstances ASIC, in protecting the public interest, may not obtain a costs order in its favour even if its contentions are accepted, or, for that matter, suffer an adverse costs order against it in the event that its contentions are not accepted by the Court.

22                  However, in this proceeding, ASIC appropriately played a significant part.  ASIC had a special interest in supporting the order sought in view of other proceedings before the Court, heard concurrently, where it also sought as final relief the winding up of APM.

23                  I propose to order that ASIC’s costs of the proceeding be costs in the winding up and be taxed on a party/party basis.

24                  ASIC also seeks costs of its notice of motion dated 28 September 2007 notwithstanding that it was dismissed on 5 October 2007.

25                  ASIC, through its notice of motion, was properly seeking to inform the Court of relevant matters which APM had failed to do in a timely and appropriate manner.  Whilst the motion was dismissed, the substantive matters raised by ASIC were accepted by the Court.  By making the general order as to costs as proposed above in favour of ASIC, without excluding the notice of motion dated 28 September 2007, ASIC will be entitled to its costs of the proceedings generally (including the notice of motion dated 28 September 2007).

Saxbys

26                  Saxbys submitted that its costs of:

·                    the notice of motion filed by APM on 24 July 2007; and

·                    the notice of motion filed by Saxbys on 28 August 2007 (to set aside the subpoena served on it),

should be:

·                    costs in the winding up; and/or

·                    paid by Mr Fisher,

in each case on an indemnity basis, alternatively on a solicitor and own client basis.

27                  For the reasons given above, I do not propose to make any orders against Mr Fisher.  However Saxbys are entitled to costs in the winding up, and the question is whether the costs should be on an indemnity (or solicitor and own client basis) or on a party/party basis.

28                  In my view, the application to restrain Saxbys was misconceived and obviously without merit, as was the subpoena to Saxbys seeking various documents in support of that application.  Saxbys put APM on notice that such application and subpoena should be withdrawn to avoid adverse cost consequences for APM.

29                  I do not accept on the current material that the application to restrain Saxbys was necessarily to intimidate or harass Saxbys or its clients, although I do accept that there was no basis to support the legitimacy of such motion to disqualify.  The allegations made against Saxbys were unsuccessful.  In my view they were clearly unmeritorious, and to the extent possible, Saxbys should not be out of pocket – see generally Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 401; Ugly Tribe Company Pty Ltd v Sikola [2001] VSC 189; Australian Guarantee Corp Ltd v De Jager [1984] VR 483 at 502.

30                  I propose to order that Saxbys costs be costs in the winding up and be taxed on an indemnity basis.

Other Supporting Creditors

31                  In relation to the other supporting creditors, I propose that the order as to costs of those professionally represented be the same as those I propose to order in relation to T & G Welding.  No submissions were received in respect of costs by those who were not professionally represented before me and I do not propose to make any order in relation to their possible disbursements.

Conclusion

32                  Accordingly, I propose to order that:

·                    The plaintiffs’ costs of the proceeding (including the hearing before Registrar Mussett) be taxed:

(a)                on a party/party basis up to and including the hearing of 11 July 2007;

(b)               thereafter on an indemnity basis of and in connection with the hearings after 11 July 2007,

and reimbursed in accordance with s 466(2) of the Corporations Act;

·                    The plaintiffs be entitled in respect of their costs to be paid out of the security provided pursuant to orders made by the Court on 29 May 2007;

·                    ASIC’s costs of the proceeding be costs in the winding up and taxed on a party/party basis; 

·                    Saxbys’ costs of the notice of motion filed by APM on 24 July 2007 and of the notice of motion filed by Saxbys on 28 August 2007 be costs in the winding up and taxed on an indemnity basis;

·                    T & G Welding’s costs of the proceeding (including the hearing before Registrar Mussett) be costs in the winding up and taxed:

(a)                on a party/party basis up to and including the hearing of 11 July 2007;

(b)               thereafter on an indemnity basis of and in connection with the hearings after 11 July 2007;

·                    R & A Cab Co Pty Ltd’s costs of the proceeding (including the hearing before Registrar Mussett) be costs in the winding up and taxed:

(a)                on a party/party basis up to and including the hearing of 11 July 2007;

(b)               thereafter on an indemnity basis of and in connection with the hearings after 11 July 2007.

Associate:

Dated:         19 November 2007