FEDERAL COURT OF AUSTRALIA

HP Mercantile Pty Limited v Crouch; in the matter of Tumut River Orchard Management Limited (in liquidation) ACN 003 501 611 (No 2) [2009] FCA 1593

IN THE MATTER OF TUMUT RIVER ORCHARD MANAGEMENT LIMITED (IN LIQUIDATION) ACN 003 501 611; HP MERCANTILE PTY LIMITED ACN 097 362 877, GEORGE ROY WILLIAM MCDONALD, JOHN CAMPBELL MYERS and ROSS CHAPMAN v NICHOLAS DAVID JAMES CROUCH IN HIS CAPACITY AS LIQUIDATOR OF TUMUT RIVER ORCHARD MANAGEMENT LTD (IN LIQUIDATION) ACN 003 501 611

NSD 1836 of 2008

GRAHAM J

21 DECEMBER 2009

SYDNEY

IN THe Matter of TUMUT RIVER ORCHARD MANAGEMENT LIMITED (IN LIQUIDATION) ACN 003 501 611

THE COURT ORDERS THAT:

1.                  Order 4 of 11 December 2009 be varied to read ‘The respondent pay one quarter of the second, third and fourth applicants’ costs of the Further Amended Interlocutory Process filed 30 November 2009.’

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THe Matter of TUMUT RIVER ORCHARD MANAGEMENT LIMITED (IN LIQUIDATION) ACN 003 501 611

REASONS FOR JUDGMENT

1                     The Further Amended Interlocutory Process filed 30 November 2009 in this matter came before the Court for consideration on 1 December 2009 and again on the afternoon of 2 December.  Orders were made on 11 December for the variation of the examination summons directed to the second, third and fourth applicants insofar as they required the production of documents at the relevant examination. 

Order 4 on that day was expressed as follows:

‘4.        The respondent pay one quarter of the second, third and fourth applicants’ costs of the Further Amended Interlocutory Process filed 30 November 2009 provided however that this order may not be entered until after 18 December 2009.’

Order 5 was as follows:

‘5.        The Further Amended Interlocutory Process be otherwise dismissed as between the second, third and fourth applicants and the respondent.’

Liberty to all parties to apply on two days’ notice for a different order as to costs was granted. 

2                     In relation to costs I endeavoured to save the parties the necessity of a further hearing by recording my tentative views as to what the appropriate order as to costs would be.

3                     Under the heading Costs, I said in my reasons for judgment of 11 December 2009 (see HP Mercantile Pty Ltd v Crouch; in the matter of Tumut River Orchard Management Ltd (In Liquidation) ACN 003 501 511 [2009] FCA 1492 at [78-81]:-

‘78.      The second, third and fourth applicants propounded that each of the examination summons should be discharged and in this regard they have failed to make good their case as recorded in the Further Amended Interlocutory Process filed 30 November 2009.  However, in relation to their alternative prayers for relief seeking the striking out of requirements for the production of documents, they have been substantially successful both in respect of the original formulation of the relevant requirement and the later formulations as well.

79.       In my opinion the appropriate order as to costs would be one under which the plaintiff/respondent, Mr Crouch, was required to pay one quarter of the second, third and fourth applicants’ costs.  

80.       Whilst it could be said that each party has enjoyed a measure of success and accordingly there should be no order as to costs, the fact is that the plaintiff/respondent did not propound an appropriate requirement for the production of documents, notwithstanding two opportunities to address the significant deficiencies in the original formulation of the document production requirements.

81.       To avoid the necessity of further costs being incurred what I propose to do is to make an order in the terms which I have proposed, but I will direct that such order not be entered for a period of seven days to allow either party to make an application seeking a different order in relation to costs.’

4                     Neither party is satisfied with the order that I had proposed and the matter has come back before the Court pursuant to the liberty to apply to allow the matter of costs to be fully argued.  I have had the advantage of submissions from counsel for the respondent and also submissions from counsel for the second, third and fourth applicants. 

5                     It is always difficult when parties are partially successful and partially unsuccessful to find the appropriate order as to costs.  Counsel for the respondent submits that there were three issues before the Court, on two of which he was successful.  He submits that in the circumstances two-thirds of the costs should be payable by the second, third and fourth applicants and after allowing an offset for the one issue on which his client was unsuccessful, there should be an order that the second, third and fourth applicants pay one-third of the respondent’s costs.

6                     Counsel for the second, third and fourth applicants submits that the respondent should pay two-thirds of the second, third and fourth applicants’ costs.  He, again, submits that there were three issues, on two of which his clients were successful.  He does not propose an offset of any amount or any fraction by reference to the third issue on which his clients were unsuccessful. 

7                     It seems to me that the issue between the parties boils down to whether or not the appropriate order is that there should be no order as to costs or that the respondent should pay one-third of the second, third and fourth applicants’ costs or that the second, third and fourth applicants should pay one-third of the respondent’s costs.  The remaining alternative is that the order which I proposed when I delivered my reasons for judgment on 11 December 2009 should stand, namely, an order requiring the respondent to pay one-quarter of the second, third and fourth applicants’ costs of the Further Amended Interlocutory Process filed 30 November 2009. 

8                     Counsel for the respondent submits that his client was successful in defending the issue of examination summons to the second, third and fourth applicants, it having been argued by those applicants that the summons themselves constituted an abuse of process and should be set aside entirely.  It is correct to say that on that issue the respondent was successful. 

9                     Counsel for the respondent puts that his argument in relation to the other part of the examination summons which dealt with the production of documents at the examination ended up successfully for the respondent as to some documents and with failure in respect of others.  He says this amounts to three issues which have been decided in two instances favourably to the respondent and in one instance unfavourably. 

10                  Counsel for the second, third and fourth applicants submit that there was an issue going to the question of whether or not the examination summons should be set aside as an abuse of process; a further issue as to whether or not the second, third and fourth applicants should be called upon to produce the documents enumerated in the various iterations of the schedule to the summons or expression otherwise of the document production requirements in paragraph (b) of the summons.  He submits that his client was successful in challenging the document production requirement.  He also says that there was a different third issue, namely, whether or not his client should be given access to the affidavits in support of the application for the issue of the examination summons.

11                  Rule 11.3(7) of the Federal Court (Corporations) Rules 2000 (Cth) was referred to in my reasons for judgment at [7].  In that paragraph the following appeared:

‘7.        Mr Crouch’s application for the issue of the examination summons in question was made in accordance with rule 11.3 of the Federal Court (Corporations) Rules 2000 (Cth) (‘the Rules’) which required the application to be supported by an affidavit stating the facts in support of the process.  In accordance with rule 11.3(7) an affidavit in support of an application for an examination summons is not to be made available for inspection by any person unless the Court otherwise orders.  As it transpires, Mr Crouch has made copies of his affidavits sworn 25 November 2008, 4 December 2008 and 28 October 2009 available for inspection by counsel for Messrs. McDonald, Myers and Chapman on the undertaking of such counsel not to disclose the contents of the affidavits or make inspection of them available to any other person without the leave of the Court to do so.’

12                  Counsel for the second, third and fourth applicants claim this disclosure as a success for the second, third and fourth applicants on his client’s application for access to the respondent’s affidavit material. 

13                  The disclosure of the three affidavits of Mr Crouch was made shortly before the luncheon adjournment on 1 December 2009.  The issue of access to the affidavits was not the subject of determination by the Court. 

14                  It seems to me that there really were two major issues which required the Court’s consideration.  Firstly, the question of whether or not the summons should be set aside as an abuse of process and in this regard the second, third and fourth applicants failed.  The second major issue was the requirement for the production of documents in respect of which the second, third and fourth applicants were substantially successful. 

15                  In normal circumstances I would have been minded to the view that there should be no order as to costs, however, it seemed to me that had the requirement for the production of documents been properly formulated by the respondent from the outset it could be said that there may not have been any challenge to the examination summons at all.  Certainly, it became necessary to put argument by reference to the original formulation and the revised formulation and by written submission the revised third version which, itself, was found to be unacceptable to the court.

16                  The respondent’s failure to properly formulate a requirement for the production of documents should not be a basis for any punishment of the respondent, however, it seems to me that the overall costs incurred were increased because of the fact that the document production requirements in the summons were inadequate throughout.  Much of the argument as to why the Court should set the examination summons aside as an abuse of process was predicated upon the selection of the documents the production of which the examination summons sought.  Whilst other fractions may be appropriate it seems to me the question for the Court is how far in which direction should the Court move from the middle position of no order as to costs?

17                  In my opinion the appropriate order is the one that I originally formulated.  Some part of the second, third and fourth applicants’ costs should be paid by the respondent.  In my opinion, there is no occasion for departing from the fraction which originally appealed to me as appropriate in that regard. 

18                  Accordingly, the order as to costs in respect of the Further Amended Interlocutory Process will be as formulated in order 4 of 11 December 2009 with the deletion of the words ‘provided however’ through to the end of the paragraph.  So that the order will read:

‘4.        The respondent pay one quarter of the second, third and fourth applicants’ costs of the Further Amended Interlocutory Process filed 30 November 2009.’

19                  There will be no order as to the costs of today.

Associate:

Dated:         23 December 2009