FEDERAL COURT OF AUSTRALIA

Smart Company Pty Ltd (In Liquidation) v Clipsal Australia Pty Ltd

[2011] FCA 821

THE COURT ORDERS THAT:

1.    The liquidators, Andrew Stradzins and Nicholas Cooper pay to the respondents costs of the appeal jointly with the appellant, including costs of the hearing on 8 July 2011.

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.

REASONS FOR JUDGMENT

1    This “appeal” commenced on 20 May 2011, and was discontinued on 6 July 2011. On 8 July 2011 I made orders that the appellant pay to the respondents their costs of the appeal to be taxed, which costs included the costs of the notice of motion of the respondents of 17 June 2011 by which they applied to strike out the appeal as incompetent and the costs of the notice of motion of the appellant of 22 June 2011 by which it applied for an extension of time within which to seek leave to appeal, and for leave to appeal, in the event that the appeal was incompetent.

2    The remaining issue is whether the liquidators of the appellant Andre Stradzins and Nicholas Cooper (the liquidators) ordered personally to be jointly liable for the costs of the appeal. It is argued by the respondents that such an order should be made as the liquidators gave the instructions for the appeal to be discontinued in the face of the motion of the respondents referred to above, and themselves have an indemnity from third parties in respect of the costs of the appeal. The effect of an order for costs against them personally will be that, through the indemnity, the costs of the appeal will be paid by those who apparently stand behind the appellant and intended to support it in the appeal and, presumably, to benefit in the event that the appeal was successful.

3    The evidence indicates that the liquidators were appointed by order of the Supreme Court of South Australia on 28 May 2011. Some six years earlier the appellant had commenced proceedings against the respondents in this Court, and those proceedings had only proceeded in a desultory fashion, as described in some detail in the judgment the subject of the appeal: The Smart Company Pty Ltd (In Liquidation) v Clipsal Australia Pty Ltd (No 6) [2011] FCA 419. Upon an assessment of the liquidators, the hearing was adjourned from time to time, but ultimately the action was dismissed by reason of the failure of the appellant to comply with orders of the Court from time to time.

4    Thereafter, the liquidators obtained counsel’s opinion as to the prospects of an appeal and instituted the appeal. In taking that action, they were provided with funding indemnities in relation to the appeal. On 26 May 2011, the liquidators executed a Deed of Indemnity with Enterprise Global Resources Pty Ltd (shareholder of the appellant), Opal World Andamooka Australia Pty Ltd, Nature Land Parks Pty Ltd, Dorothea Tomazos (one of the directors of the appellant at the time of its liquidation) and Sotiri Portelos. All of them acknowledged that the indemnity covered the costs associated with obtaining an opinion as to the merits of appealing the primary judgment, and the costs associated with that appeal.

5    Counsel for the liquidators indicated that the liquidators resisted the costs order sought against them. They were given the opportunity to respond to that application, including by the granting of an adjournment to adduce such further evidence as the liquidators may wish to adduce, in addition to them making such submissions as they may be advised. The liquidators by letter of 14 July 2011 indicated that they did not wish either to adduce further evidence, or to make further submissions, in opposition to the costs order sought against them.

6    There is no doubt that the Court under s 43 of the Federal Court of Australia Act 1976 (Cth) has power to make an order for costs against the liquidators: see Caboolture Park Shopping Centre Pty Ltd (In Liquidation) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224. The principles upon which such an order for costs might be made are those discussed by the High Court in Knight v FP Special Assets Limited (1992) 174 CLR 178.

7    In my view, the present circumstances amply warrant the exercise of the discretion to order that the liquidators be personally jointly liable with the appellant for the costs of the appeal as ordered. They made the decision to institute the appeal in the name of the appellant. They took the precaution of seeking an indemnity for costs of the appeal from those apparently interested in its outcome, and who in some way or another stood to gain if the appeal were successful. Their personal liability will be indemnified in accordance with that arrangement. In those circumstances, there is no element of inhibiting an officer of the Court from properly bringing proceedings. They obviously took the appropriate precaution of seeking the indemnity. I do not infer anything about the strength or otherwise of the prospects of success on the appeal from the mere fact of its discontinuance. There is on the other hand nothing in the grounds of appeal in the amended notice of appeal filed on 17 June 2011 which directly comes to grips with the numerous defaults of the appellant in the long and protracted conduct of the proceeding at first instance, as recorded at considerable length in the primary judgment. The amended notice of appeal identifies in a significant number of respects matters about which complaint is made, but it is fair to say that, even allowing a number of those points as correct, fundamentally the appellant was given many opportunities to comply with a series of orders of the Court and had not done so over a number of years. It is also fair to say that there was a very strong argument that the judgment appealed from was an interlocutory judgment because the dismissal of the proceedings was not after the hearing and determination of the claim but because the appellant had failed to comply with a series of orders of the Court. If that be correct, both the application for an extension of time for leave to appeal and the application for leave to appeal faced considerable obstacles. Two obvious obstacles, raised with counsel for the appellant when the application for an extension of time was listed for hearing was the continued failure of the appellant to meet orders for costs which had been made by the primary judge, as costs fixed and payable forthwith, and secondly the absence of any proposal on the part of the appellant by which the respondents’ costs of the appeal would be protected by provision of security for its costs on the appeal notwithstanding that history and notwithstanding the fact that it is in liquidation. Although those matters are not integral to my decision to make the order for costs which I propose, they are additional matters which point strongly in that direction.

8    Accordingly, I order that Andre Stradzins and Nicholas Cooper pay to the respondents costs of the appeal jointly with the appellant. Those costs should include the costs of the hearing on 8 July 2011.

Associate:

Dated:    20 July 2011