FEDERAL COURT OF AUSTRALIA

Kazar, in the matter of Frontier Architects Pty Limited (in liq) (No 2)[2010] FCA 1474

IN THE MATTER OF FRONTIER ARCHITECTS PTY LIMITED (IN LIQUIDATION) (ACN 099 631 982)

THE COURT ORDERS THAT:

1.    In proceedings ACD 51 of 2009, the Plaintiff’s application be dismissed.

2.    In proceedings ACD 51 and 52 of 2009, the Plaintiff pay the Defendants 75% of their costs, such costs to be taxed if not agreed.

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 Federal Law Search on the Court’s website.

IN THE MATTER OF TECHNO BUILD DEVELOPMENTS PTY LIMITED (IN LIQUIDATION) (RECEIVER & MANAGER APPOINTED) (ACN 066 616 091)

THE COURT ORDERS THAT:

1.    In proceedings ACD 52 of 2009:

(a)    A declaration that the Defendant is and was at all material times a “close associate” (within the meaning of s 9 and s 588FDA(1)(b)(ii) of the Corporations Act 2001 (Cth) (“the Act”)) of Amrollah Aghili (also known as ‘Roland Aghili’).

(b)    A declaration that the Defendant was a party to and received the benefit of an unreasonable director-related transaction in respect of the unpaid costs borne by Techno Build Developments Pty Ltd (In Liq) ACN 066 616 091 (“the Company”) for constructing the residential house located on the land known as Nicholls Section 130 Block 2 in the Australian Capital Territory and the Company’s builder’s margin.

(c)    A declaration that the transaction stated above is voidable pursuant to s 588FE(6A) of the Act because it is an unreasonable director-related transaction which was entered into and acts were done for the purpose of giving effect to the transaction during the four years ending on the relation-back day (being 26 June 2007).

2.    In proceedings ACD 52 of 2009:

(a)    pursuant to s 588FF of the Act, that the Defendant pay to the Company the amount of $150,000.00 (“the Judgment Sum”) in respect of the unpaid costs borne by the Company for constructing the residential house located on the land known as Nicholls Section 130 Block 2 in the Australian Capital Territory and the Company’s builders margin.

(b)    the Defendant pay pre-judgment interest on the Judgment Sum pursuant to s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth) from 4 December 2009 to Judgment.

(c)    the Defendant pay interest on the Judgment Sum as may be outstanding from time to time pursuant to section 52 of the Federal Court of Australia Act 1976 (Cth).

3.    In proceedings ACD 51 and 52 of 2009, the Plaintiff pay the Defendants 75% of their costs, such costs to be taxed if not agreed.

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 Federal Law Search on the Court’s website

IN THE MATTER OF FRONTIER ARCHITECTS PTY LTD (IN LIQUIDATION) (ACN 099 631 982)

IN THE MATTER OF TECHNO BUILD DEVELOPMENTS PTY LIMITED (IN LIQUIDATION) (RECEIVER & MANAGER APPOINTED) (ACN 066 616 091)

REASONS FOR JUDGMENT

1    On 10 December 2010 judgment was delivered in two proceedings commenced in the ACT Registry of this Court in 2009: Kazar, in the matter of Frontier Architects Pty Limited (in liq) [2010] FCA 1381. Notwithstanding the fact that the two proceedings were heard together, they nevertheless formally remain separate proceedings.

2    In one proceeding, described as the Frontier Architects proceeding, the Defendants (Mr and Mrs Kargarian) were successful and the application in that proceeding has been dismissed. In the other proceeding, described as the Techno Build proceeding, the sole Defendant (Mrs Kargarian) was unsuccessful.

3    Two of the issues which emerged in respect to the orders to be made were:

(i)    the appropriate order as to costs; and

(ii)    a claim for interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).

The granting of declaratory relief in the Techno Build proceeding was not opposed.

Costs

4    Written submissions were exchanged between the parties after the 10 December 2010 judgment, and oral submissions were advanced on 17 December 2010. Orders were made on 20 December 2010 to give effect to the reasons published on 10 December 2010 and it was then stated that reasons for making the costs order would be delivered today. These are those reasons.

5    The starting point for any order as to costs is most probably the proposition that costs should normally follow the event – in which case, the Defendants in the Frontier Architects proceeding would have an order for costs in their favour; and in the Techno Build proceeding the Defendant would have to pay costs: Ruddock v Vadarlis (No 2) [2001] FCA 1865 at [11], 115 FCR 229 at 234 to 235 per Black CJ and French J (as His Honour then was). In Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460 at 477 it was said to be “a general rule that a wholly successful defendant should receive his costs unless good reason is shown to the contrary”. The December 2010 judgment, however, envisaged that a preferable course may be to simply make a single order for costs.

6    Competing draft Short Minutes of Orders were circulated before the hearing on 17 December 2010. Oral submissions on that occasion canvassed a number of approaches that could be pursued, including one suggestion that the costs incurred prior to the joint hearing be distinguished from those incurred during the joint hearing itself. The costs of the joint hearing itself could, on that approach, be apportioned between the two proceedings. That course, so contended the Plaintiff liquidator, would give effect to his lack of success in one proceeding and his success in the other. Whatever order were to be made in respect to the joint hearing, his success in the Techno Build proceeding – so he contended – should sound in an order that he be paid his costs incurred prior to hearing.

7    Notwithstanding the force of the Plaintiff liquidator’s submissions, it was concluded on 20 December 2010 that the Defendants should have 75% of the costs they have incurred in the two proceedings. But for the lack of success of the Defendant in the Techno Build proceeding, the Defendants would have obtained an order that they should be paid the entirety of their costs in the two proceedings. To reduce their entitlement to 75% is a recognition of:

    the success of the Plaintiff liquidator in the Techno Build proceeding; and

    the fact that the Frontier Architects proceeding was, comparatively, by far the more factually and legally complex of the two proceedings and occupied the greater part of the hearing in Canberra in September 2010 both in evidence and submissions. Notwithstanding the success of the Plaintiff liquidator in the Techno Build proceeding, any apportionment of those costs to which he would have been entitled in respect to the hearing itself would have been minimal.

It is anticipated that the single order for costs made on 20 December 2010 may facilitate the taxation process in the event that agreement cannot be reached as to the quantum of costs that should be paid.

8    It is considered that the width of the discretion as to costs conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) is sufficiently wide to confer power to make a single order as to costs in two proceedings which have been heard at one and the same time. The power to apportion costs is a power, of course, frequently invoked where a party who has ultimately prevailed in obtaining relief has nevertheless been unsuccessful in respect to a part or parts of his claim: e.g., Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319 to 320; Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) [2005] FCA 1400 at [3], 225 ALR 569; JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (No 2) [2005] FCA 1490 at [3]. But that is an apportionment of costs in the one proceeding.

9    The discretion conferred by s 43 must, of course, be exercised judicially and not arbitrarily: e.g., Hughes v Western Australian Cricket Association (Inc.) (1986) ATPR 40-748 at 48,136; Australian Competition and Consumer Commission v Seal-A-Fridge Pty Ltd (No 2) [2010] FCA 681 at [15].

10    Subject to that constraint, however, there is considered to be no reason why the discretion is not sufficiently broad to enable a single costs order to be made where a number of proceedings have been heard together. In many cases where a number of proceedings are heard together, there is:

    a saving in Court time; and

    a saving in the costs ultimately incurred by the parties.

11    Such an exercise of power was invoked in Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602. The Applicants in that case had commenced four separate proceedings against four different groups of respondents. In apportioning costs, Goldberg J there said:

[95] If it be accepted that it is appropriate to have multiple proceedings heard together, where there are common issues of fact and law involved, for the purpose of reducing costs and having an efficient and economical use of court resources, it is also appropriate to consider whether in such circumstances there should be variations to the usual order as to costs. In particular it is appropriate to give consideration to the apportionment of the costs of an applicant incurred in relation to issues and matters common to those proceedings between those proceedings where the applicant is successful and those proceedings where the applicant is unsuccessful.

In BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557 at [11], the parties were apparently in agreement that a “global order for costs” should be made in the circumstances where two proceedings had been heard together. And in Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 5) [2010] FCA 545 three motions had been filed in two proceedings and had been heard together, with mixed success for each party. Each party was ordered to bear his or its own costs in relation to the motions.

12    Nor should the width of the discretion conferred by s 43 be confined to those circumstances in which a number of different proceedings have been heard together and involve common questions of either fact or law.

13    Where it is possible, as it is in the present proceedings, to form a view as to how an order or orders for costs should be apportioned between the parties, it is concluded that the discretion conferred by s 43 may be exercised to give effect to that view. It is considered that an order that the Defendants are entitled to 75% of their costs in respect to the two proceedings is a fair and just order giving effect to the comparative success of the parties. Such an apportionment remains a judicial exercise of power rather than an arbitrary exercise of the discretion, notwithstanding the fact that it may not be founded in “mathematical precision”: see Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272. Nor is it a departure from the “general rule” that a successful party “should receive his costs”. The success of the Plaintiff liquidator, and his entitlement to costs in the Techno Build proceeding, is recognised and given effect to in the reduction of the costs payable to the Defendants from 100% to 75%.

Interest

14    Section 51A of the Federal Court of Australia Act 1976 (Cth) provides for the making of an order that interest be paid up to the judgment. Sub-section (1) provides as follows:

In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:

(a)    order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or

(b)    without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.

Section 51A(1) has been described as a “facultative provision intended to confer power on the Court to do justice between parties in relation to pre-judgment interest; a matter of some importance in these days of high interest rates and extensive delays in finalising litigation”: State Bank of New South Wales Limited v Commissioner of Taxation (1995) 62 FCR 371 at 385 per Wilcox J.

15    In the Techno Build proceeding, it is considered that an order should be made for the payment of interest. There is no “good cause … shown to the contrary”.

16    That proceeding was one “for the recovery of … money” (cf. Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Telstra Corporation Ltd [2007] FCA 1515, 168 IR 353). But interest should only be ordered for “part of the period”, namely as from 4 December 2009. Although the sole Defendant to this proceeding, Mrs Kargarian, transferred the property on which the home was built in 2006, the Plaintiff liquidator did not commence the proceeding until 4 December 2009. He was appointed as liquidator on 20 September 2007. To order that interest be paid from an earlier date, it is considered, would work an unfairness to the Defendant.

Conclusions

17    In adhering to the view tentatively expressed in the 10 December 2010 judgment, the Plaintiff liquidator has been ordered to pay the Defendants 75% of their costs incurred in the two proceedings. Such an order has been made notwithstanding the fact that the Plaintiff liquidator opposed the making of a single costs order.

ORDERS

18    The Orders of the Court (as made on 20 December 2010) are:

In ACD 51 of 2009

1.    In proceedings ACD 51 of 2009, the Plaintiff’s application be dismissed.

2.    In proceedings ACD 51 and 52 of 2009, the Plaintiff pay the Defendants 75% of their costs, such costs to be taxed if not agreed.

In ACD 52 of 2009

1.    In proceedings ACD 52 of 2009:

(a)    A declaration that the Defendant is and was at all material times a “close associate” (within the meaning of s 9 and s 588FDA(1)(b)(ii) of the Corporations Act 2001 (Cth) (“the Act”)) of Amrollah Aghili (also known as ‘Roland Aghili’).

(b)    A declaration that the Defendant was a party to and received the benefit of an unreasonable director-related transaction in respect of the unpaid costs borne by Techno Build Developments Pty Ltd (In Liq) ACN 066 616 091 (“the Company”) for constructing the residential house located on the land known as Nicholls Section 130 Block 2 in the Australian Capital Territory and the Company’s builder’s margin.

(c)    A declaration that the transaction stated above is voidable pursuant to s 588FE(6A) of the Act because it is an unreasonable director-related transaction which was entered into and acts were done for the purpose of giving effect to the transaction during the four years ending on the relation-back day (being 26 June 2007).

2.    In proceedings ACD 52 of 2009:

(a)    pursuant to s 588FF of the Act, that the Defendant pay to the Company the amount of $150,000.00 (“the Judgment Sum”) in respect of the unpaid costs borne by the Company for constructing the residential house located on the land known as Nicholls Section 130 Block 2 in the Australian Capital Territory and the Company’s builders margin.

(b)    the Defendant pay pre-judgment interest on the Judgment Sum pursuant to s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth) from 4 December 2009 to Judgment.

(c)    the Defendant pay interest on the Judgment Sum as may be outstanding from time to time pursuant to section 52 of the Federal Court of Australia Act 1976 (Cth).

3.    In proceedings ACD 51 and 52 of 2009, the Plaintiff pay the Defendants 75% of their costs, such costs to be taxed if not agreed.

Associate:

Dated:    24 December 2010