FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Letten (No 14)

[2011] FCA 1174

THE COURT ORDERS THAT:

1.    Mirvac Hotels Pty Ltd pay the indemnity costs of:

(1)    the Plaintiff;

(2)    Westpac Banking Corporation; and

(3)    Damian Templeton and Phillip Hennessy of KPMG, the Receivers,

in relation to the Interlocutory Process filed on 19 August 2011, such costs to be taxed in default of agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

A    INTRODUCTION

1        On 7 October 2011, reasons for decision were published in relation to an Interlocutory Process filed by the Receivers of the Reef House Scheme seeking directions: Australian Securities and Investments Commission v Letten (No 13) [2011] FCA 1151. The same terms are adopted in these reasons for decision. In general terms, declarations were made that the Receivers were justified in refusing to pay to Mirvac Hotels Pty Ltd (Mirvac) the sum of $542,040 (the Termination Fee), being the Termination Fee claimed by Mirvac under a Hotel Management Agreement dated 27 April 1998 (HMA) between the seventh defendant, Firbank Arch Pty Ltd (Firbank Arch), and Mirvac, as an expense of the receivership of Firbank Arch.

2        On the question of costs of the Interlocutory Process, the Receivers, Mirvac, Westpac Banking Corporation (Westpac) (as the Secured Lender) and the Australian Securities and Investments Commission (ASIC) were directed to file agreed orders, or file and serve submissions. They cannot agree. Each has filed submissions. In general terms, Mirvac submitted that its costs should be paid by the Receivers out of the fund held by them, or if that order is not made, that there should be no order for costs against Mirvac. The other participants sought an order that Mirvac pay their costs. The Receivers and Westpac sought their costs from Mirvac on an indemnity basis.

B    ANALYSIS

Costs order?

3        Where an application for directions in the course of a receivership or a winding up is complex, or involves a relatively novel proposition in law, the starting point is that the costs of a “proper contradictor” are paid out of the assets of the company: Farrow Finance Company Ltd (in liq) v ANZ Executors and Trustee Company Ltd (1997) 23 ACSR 521 at 527.

4        Mirvac submitted that it had acted as a “proper contradictor” to the Interlocutory Process, and there were no special circumstances which warranted deviation from that starting point. Indeed, Mirvac submitted that there was an additional reason why its costs should be paid out of the funds held by the Receivers – it had been “partly successful”.

5        I reject Mirvac’s submissions. First, Mirvac did not act as a “proper contradictor”. It acted purely in its own self interest. Secondly, to the extent that Mirvac was “partly successful”, those issues were resolved prior to the substantive hearing and were not considered by the Court. That left the issues in dispute between the Receivers and Mirvac which were the subject of directions. In relation to those matters, Mirvac was wholly unsuccessful. In the circumstances, it is appropriate that costs follow the event, as they would have if Mirvac had issued proceedings against the Receivers.

6        Westpac and ASIC also sought to have their costs of the Interlocutory Process paid by Mirvac. I accept those submissions. In my view, their participation in the hearing of the Interlocutory Process was necessary, objective and reasonable and, to the extent that it matters, responsive to issues raised by the Court and directly relevant to it.

Indemnity costs?

7        The next question was whether the Receivers’ and/or Westpac’s costs should be paid by Mirvac on an indemnity basis.

8        Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad discretion on the Court to award costs in proceedings. In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 152, Black CJ stated the principles applicable to a claim for indemnity costs:

… it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the Court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless, the Court has an absolute and unfettered jurisdiction in awarding costs, although the discretion must be exercised judicially. So, indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court in exercising its discretion in that way.

9        The Receivers produced a letter dated 18 February 2011 (prior to the hearing) that they had sent to Mirvac stating that its claim was misconceived and inviting Mirvac to withdraw it. The Receivers submitted that Mirvac’s failure to accept the Receivers’ adjudication of its claim for priority costs in that letter caused the fund to incur the additional expense of bringing the Interlocutory Process including the costs associated with listing the matter for hearing, a mini-discovery exercise, preparation of an affidavit and submissions, the expense of briefing Counsel, the costs of attending the hearing of the Interlocutory Process and the costs associated with addressing Mirvac’s belated argument regarding the Deed of Consent including, inter alia, preparation of additional submissions and attendance at a telephone directions hearing.

10        Westpac also sought an order for payment of its costs on an indemnity basis. Specifically, Westpac referred to the lateness with which Mirvac raised arguments concerning the Deed of Consent, which required Westpac to respond urgently, and that Mirvac’s arguments failed in their entirety.

11        In the present case, I consider there were special or unusual features justifying the Court exercising its discretion to award indemnity costs. The Interlocutory Process raised real and substantial questions for determination but it would not have been necessary if Mirvac had accepted the Receivers’ adjudication of its claim. Moreover, its claim failed, legally and factually. On balance, it is appropriate that the Receivers and Westpac’s costs of the Interlocutory Process be paid on an indemnity basis, such costs to be taxed in default of agreement. ASIC did not seek an indemnity costs order. However, I consider that its costs should also be paid on an indemnity basis.

Associate:

Dated:    18 October 2011

SCHEDULE OF PARTIES

LGH HOLDINGS LIMITED (ACN 077 191 943)

Second Defendant

211 WELLINGTON ROAD PTY LTD (ACN 092 663 860)

Third Defendant

BLUEMIST HOLDINGS PTY LTD (ACN 097 306 922)

Fourth Defendant

DELLWOOD HOLDINGS PTY LTD (ACN 098 505 803)

Fifth Defendant

ENMORE ENTERPRISES PTY LTD (ACN 082 158 487)

Sixth Defendant

FIRBANK ARCH PTY LTD (ACN 059 464 381)

Seventh Defendant

GLENLINE PTY LTD (ACN 098 532 364)

Eighth Defendant

GERLING HOLDINGS PTY LTD (ACN 091 726 457)

Ninth Defendant

LGH ADMINISTRATION PTY LTD (ACN 007 165 069)

Tenth Defendant

LGH FINANCE PTY LTD (ACN 078 859 248)

Eleventh Defendant

LOW HEAD VILLAGE PTY LTD (ACN 091 731 958)

Twelfth Defendant

NICHOLSON STREET PTY LTD (ACN 069 104 089)

Thirteenth Defendant

HOLLOWAY CREST PTY LTD (ACN 091 731 967)

Fourteenth Defendant

ROSEBERY ENTERPRISES PTY LTD (ACN 091 826 229)

Fifteenth Defendant

SIMMS INVESTMENTS PTY LTD (ACN 093 504 511)

Sixteenth Defendant

SY21 RETAIL PTY LTD (ACN 107 874 564)

Seventeenth Defendant

THE GLEN CENTRE HAWTHORN PTY LTD (ACN 089 906 543)

Eighteenth Defendant

CASTELLO HOLDINGS PTY LTD (ACN 088 204 175)

Nineteenth Defendant

TWINVIEW NOMINEES PTY LTD (ACN 097 307 278)

Twentieth Defendant

YARRA VALLEY GOLF PTY LTD (ACN 066 632 479)

Twenty-First Defendant

ADINA RISE PTY LTD (ACN 083 181 122)

Twenty-Second Defendant

ALBRIGHT INVESTMENTS PTY LTD (ACN 088 204 166)

Twenty-Third Defendant

ASHFIELD RISE PTY LTD (ACN 093 504 806)

Twenty-Fourth Defendant

BRADFIELD CORPORATION PTY LTD (ACN 088 204 371)

Twenty-Fifth Defendant

COPELAND ENTERPRISES PTY LTD (ACN 093 504 824)

Twenty-Sixth Defendant

DEVLIN WAY PTY LTD (ACN 088 264 813)

Twenty-Seventh Defendant

FIRST HAZELWOOD PTY LTD (ACN 093 505 303)

Twenty-Eighth Defendant

GLENBELLE PTY LTD (ACN 097 306 646)

Twenty-Ninth Defendant

GLENVALE WAY PTY LTD (ACN 088 287 021)

Thirtieth Defendant

GREENVIEW LANE PTY LTD (ACN 093 505 312)

Thirty-First Defendant

HALLMARK CORPORATION PTY LTD (ACN 093 505 312)

Thirty-Second Defendant

MOORLEIGH HOLDINGS PTY LTD (ACN 088 287 058)

Thirty-Third Defendant

NORTON RIDGE PTY LTD (ACN 078 821 066)

Thirty-Fourth Defendant

RALEIGH GLEN PTY LTD (ACN 088 204 380)

Thirty-Fifth Defendant

REDCREST HOLDINGS PTY LTD (ACN 100 836 486)

Thirty-Sixth Defendant

SURI CORPORATION PTY LTD (ACN 093 505 321)

Thirty-Seventh Defendant

SUTTON RISE PTY LTD (ACN 088 204 399)

Thirty-Eighth Defendant

THE VIRTUAL MLMER PTY LTD (ACN 065 374 665)

Thirty-Ninth Defendant

TIVENDALE PTY LTD (ACN 093 505 349)

Fortieth Defendant

TULLOCH DOWNES PTY LTD (ACN 078 895 048)

Forty-First Defendant

MAINKING PTY LTD (ACN 100 790 485)

Forty-Second Defendant

TOPGLEN PTY LTD (ACN 096 857 564)

Forty-Third Defendant

ALLBLUE PTY LTD (ACN 100 836 388)

Forty-Fourth Defendant

ARANBAY PTY LTD (ACN 098 532 319)

Forty-Fifth Defendant

MELVILLE CORPORATION PTY LTD (ACN 091 911 045)

Forty-Sixth Defendant

TILLEY LANE PTY LTD (ACN 086 136 361)

Forty-Seventh Defendant

HPSC PTY LTD (ACN 059 930 139

Forty-Eighth Defendant

JENSDALE PTY LTD (ACN 098 367 974)

Forty-Ninth Defendant

OAKDALE RISE PTY LTD (ACN 091 598 908)

Fiftieth Defendant