FEDERAL COURT OF AUSTRALIA

DJ Builders & Son Pty Ltd (in liq), in the matter of DJ Builders & Son Pty Ltd (in liq) v Queensland Building and Construction Commission (No 2) [2020] FCA 77

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 1.36 of the Federal Court Rules 2011 (Cth), these Orders and the Reasons for judgment in support of these Orders are made and published from Chambers.

2.    Subject to the second applicant and Lawrence Doré complying with Orders 3 and 4 below, leave is granted to the second applicant nunc pro tunc to bring and take responsibility for this proceeding on behalf of the first applicant.

3.    The second applicant and Lawrence Doré pay and bear (and indemnify the first applicant against) all costs, charges and expenses (including remuneration) of and incidental to the bringing and continuation of this proceeding brought by the second applicant on behalf of the first applicant.

4.    The second applicant and Lawrence Doré pay into court the sum of $125,000.00 within 30 days of the order of this Court as security for the indemnity in Order 3 above (the Security).

5.    The Security is:

(a)    held by way of security for any further adverse costs order that may be made against the first applicant or the liquidator for the first applicant;

(b)    not to be released other than pursuant to the express written agreement of the liquidator of the first applicant and the second applicant or pursuant to an order of the Court.

6.    To the extent that the liquidator of the first applicant considers that further security for the costs referred to in Order 5(a) above is required:

(a)    the parties are to consult and attempt to agree upon an appropriate quantum and form of security on a stage-by-stage basis in relation to the conduct of the proceeding; and

(b)    to the extent that the parties cannot agree on the quantum or form of security, the liquidator has liberty to apply to the Court.

7.    The applicants are to file and serve affidavits on which they rely on or before 28 February 2020.

8.    The matter is adjourned for a further case management hearing at 9.30 am on 26 March 2020.

9.    The second applicant and Lawrence Doré pay the first applicant’s costs of the second applicant’s application for interlocutory relief filed on 5 June 2019.

10.    Costs of the second applicant’s application for interlocutory relief filed on 5 June 2019 as between the respondent and the second applicant are reserved.

11.    The parties have liberty to apply on 3 days’ notice.

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

REASONS FOR JUDGMENT

REEVES J:

1    When I delivered judgment in this matter ([2019] FCA 2018), I made orders requiring the parties to consult and to agree upon, and submit, a draft set of orders to my chambers which reflected the contents of my reasons for judgment. Regrettably, the parties could not reach agreement on those orders so they were subsequently ordered to file written submissions on that issue. Essentially, three issues emerged from the written submissions that were filed. They are:

(a)    the form of the indemnity to be provided by Forward Pack (the second applicant) to Mr Glen Oldham, the liquidator of the company DJ Builders & Son Pty Limited (in liquidation) (DJ Builders) (the first applicant);

(b)    whether the moneys to secure that indemnity should be paid into court;

(c)    whether Forward Pack should be ordered to pay the liquidator’s costs to date.

The second issue above is now agreed. I will address the remaining two issues in order below.

2    First, it is convenient to set out the competing sets of draft orders advanced by each of the liquidator and Forward Pack. They are as follows:

[The liquidator’s proposed orders]

1.    Subject to the second applicant and Lawrence Dore complying with paragraphs 2 and 3 below, leave is granted to the second applicant nunc pro tunc to bring and take responsibility for this proceeding on behalf of the first applicant.

2.    The second applicant and Lawrence Dore pay and bear (and indemnify the first applicant against) all costs, charges and expenses (including remuneration) of and incidental to the bringing and continuation of this proceeding brought by the second applicant on behalf of the first applicant.

3.     The second applicant and Lawrence Dore pay into Court the sum of $125,000.00 within 30 days of the order of this court as security for the indemnity in paragraph 2 of this order.

4.    The second applicant and Lawrence Dore pay the first applicant’s costs of the proceeding.

5.    The parties have liberty to apply.

[Forward Pack’s proposed orders]

Leave to proceed

1.    Upon the second applicant complying with Order 3, below, the second applicant have leave, nunc pro tunc, to bring and take responsibility for these proceedings for and on behalf of the first applicant.

Indemnity and Security

2.    The second applicant and Mr Lawrence Frederick Doré indemnify the first applicant against and the liquidator of the first applicant, Mr Glen Oldham, against any adverse costs orders made against them in relation to these proceedings.

3.    Within 30 days of the making of this order, the second applicant deposit the sum of $125,000 into Court by way of security for the indemnity in Order 2 (Security).

4.    The Security is:

(a)    held by way of security for any adverse costs order that may be made against the first applicant or the liquidator for the first applicant;

(b)    not to be released other than pursuant to the express written agreement of the liquidator of the first applicant and the second applicant or pursuant to an order of the Court.

5.    To the extent that the liquidator of the first applicant considers that further security for the costs referred to in Order 4(a) above is required:

(a)    the parties are to consult and attempt to agree upon an appropriate quantum and form of security on a stage-by-stage basis in relation to the conduct of the proceedings; and

(b)    to the extent that the parties cannot agree on the quantum or form of security, the liquidator has liberty to apply to the Court.

Preparation of evidence

6.    The applicants are to file and serve affidavits on which they rely on or before 28 February 2020.

Other

7.    The matter is adjourned to a further case management hearing at 9.30 am on […]

8.    The parties have liberty to apply on 3 days’ notice.

9.    Costs of the second applicant’s application for interlocutory relief are reserved.

3    The first issue above ([1(a)]) concerns proposed Order 2 in both sets of draft orders. The third issue above [1(c)]) relates to proposed Order 4 of the liquidator’s draft orders and proposed Order 9 of Forward Pack’s draft orders.

The form of the indemnity – issue 1(a)

4    The necessity for such an indemnity arose as a part of the “practicalities associated with the proceeding” that Forward Pack wished to pursue in DJ Builder’s name (Reasons at [5]). At [7] of the Reasons, I observed that those practicalities included “whether the company and liquidator have been properly secured, in respect of any adverse costs order they may sustain as a result of the contemplated proceedings or any other costs, charges and expenses they may incur in the winding up consequent upon the continuation of this proceeding” (emphasis added). In support of this statement, I cited two authorities: Carpenter v Pioneer Park Pty Ltd (2008) 71 NSWLR 577; [2008] NSWSC 551 (Carpenter) at [34] per Barrett J and El-Saafin & Anor v Franek & Ors (No 2) [2018] VSC 683 (El-Saafin) at [167] per Lyons J. I did not elaborate further by quoting from those judgments, but, in view of the dispute that has now arisen in respect of this issue, it is appropriate I should do so now.

5    In Carpenter at [34], Barrett J identified as one of the three matters upon which attention focused in exercising the discretion to grant an application of the kind made by Forward Pack in this matter “[t]he question whether ‘practical considerations support the initiation of the proceedings’, with particular reference to financial protection of the liquidator and the estate of the company by means of indemnity and, if indicated, security”.

6    In El-Saafin, Lyons J quoted Carpenter at [34] above and went on to observe (at [168]):

As to the third matter, the Court is keen to ensure that the assets of the company in liquidation are not put at risk by the proceeding and that the liquidator is not exposed to personal liability. As a result, the Court may require that the person who conducts the litigation ‘gives an indemnity supported by security for the benefit of the company and the liquidator, and perhaps also security for costs to protect the other party to litigation’.

(Footnote omitted)

7    It was these considerations that I was referring to when I said in my Reasons at [9] that “[s]ubject to this qualification and to this indemnity and its supporting security being properly expressed in the orders to be made, I consider this proposal is adequate to meet the practicalities matter mentioned above”. The qualification to which I referred in my opening words was the staging of the security mentioned in the sentence which preceded this quotation.

8    Having regard to these parts of my reasons, I consider the liquidator is correct in his submissions as follows:

Consistent with the authorities cited and the submissions made by the parties at the hearing, Reeves J’s reasons plainly require [Forward Pack] to do two things. First, Forward Pack must indemnify the liquidator and the company ‘in respect of any adverse costs order they may sustain as a result of the contemplated proceedings or any other costs, charges and expenses they may incur in the winding up consequent upon the continuation of this proceeding.’ The indemnity should ‘be properly expressed in the orders to be made’. Second, the sum of $125,000 must be paid into Court or a controlled moneys account as security for the indemnity given by [Forward Pack].

9    And further:

[Forward Pack’s] position misunderstands the Court’s reasons … [Forward Pack] had retreated from the position it took before the Court (and noted by his Honour). This is not an application for security for costs. The $125,000 is not security for an adverse costs order that may be ordered in the derivative proceeding. The security is to secure [Forward Pack’s] obligation to indemnify the liquidator and the company in the way Reeves J observed at [13] –adverse costs and any other costs, charges and expenses that may be incurred in the winding up because of the derivative proceeding. As his Honour observed at [15], the indemnity should be ‘properly expressed in the orders to be made’.

10    I note that in its written submissions, the Queensland Building and Construction Commission (QBCC) made essentially the same points as the liquidator above.

11    For these reasons, I reject Forward Pack’s submission that its proposed Order 2 appropriately reflects the contents of my reasons on this aspect.

The liquidator’s costs to date – issue 1(c)

12    It can be seen from proposed Order 4 of the liquidator’s draft orders that he seeks an order that Forward Pack and Mr Doré (Forward Pack’s sole director) pay the company’s costs of the proceeding. It emerged in submissions that this was really intended to be an application for the company’s costs of Forward Pack’s application to date, rather than the costs of the whole proceeding. In making this application, the liquidator relies upon two matters. First, the principle adverted to above, that the company and its creditors should not be required to bear any of the costs associated with this proceeding being pursued in its name, thus the necessity for Forward Pack to indemnify the liquidator against such costs. Secondly, he contends that he was successful in “the proceeding”, namely Forward Pack’s application, and costs should follow that event. He contends that those costs were properly incurred by him in that he was a necessary party to the application. In support on this aspect, he points to the Reasons at [5] that “[t]he attitude of the liquidator to the proposed proceeding is also a relevant consideration”. He further contends that, while he did not oppose the granting of the leave, as the Reasons reveal, he was successful in drawing attention to the inadequacy of the indemnity originally proposed by Forward Pack and Mr Doré and the inadequacy of the security offered in support of it. Finally, he contends that Forward Pack’s proposal that his costs should be reserved to await the outcome of the proceeding in the company’s name against the QBCC confuses two cost-related “events”. That is to say, the outcome of that proceeding and the outcome of Forward Pack’s present application.

13    The QBCC supports the liquidator’s submissions on the question of costs as between him and Forward Pack and submits that, as between it and Forward Pack, those costs should be reserved.

14    Forward Pack opposes the liquidator’s application for costs of the proceeding to date. It contends that its application involved an exercise of the Court’s supervisory and protective jurisdiction and, as such, it was appropriate for the parties, including the liquidator, to raise any concerns to assist the Court in the exercise of that jurisdiction. It cites Australian Capital Territory Commissioner for Revenue v Slaven (2009) 178 FCR 334; [2009] FCA 744 (Slaven) at [63] as an example of a case where no order as to costs was made in similar circumstances. It contends that, instead, the liquidator’s costs should be reserved to await the outcome of the proceeding against the QBCC. It advances the following three reasons for that contention:

a.    the outcome of the proceeding is yet to be determined and costs would ordinarily follow the event;

b.    to the extent that “the proceeding” was intended to mean the second applicant’s application for interlocutory relief, the liquidator played an appropriate and proper role in the application …; and

c.    the liquidator is otherwise indemnified against any adverse costs with supporting security in the terms contemplated by proposed orders 3, 4 and 5.

15    In my view, the liquidator’s submissions should be accepted. First, the order he seeks is consistent with the principle that the company should be protected against costs of this kind associated with the proceeding being pursued in its name. Indeed, Forward Pack appears to accept as much in the second and third reasons advanced by it above ([14(b)] and [14(c)]. Secondly, there is no logic in linking the liquidator’s entitlement to costs to the outcome of the proceeding against the QBCC. This application and that proceeding involve, as the liquidator has correctly submitted, two different and distinct “events”. Thirdly, I do not consider the judgment in Slaven at [63] states any relevant principle affecting the exercise of my discretion as to costs in this matter. Accordingly, I consider an order should be made in the form of proposed Order 4 of the liquidator’s draft orders.

CONCLUSION

16    For these reasons, subject to adding the words “(the Security)” at the end of Order 3, I will make orders in the terms of proposed Orders 1 to 4 inclusive of the liquidator’s draft orders and not make orders in terms of Orders 1 to 3 inclusive of Forward Pack’s draft orders. As to the remaining orders proposed by Forward Pack, they are not opposed and, subject to the alterations below, I consider they are consistent with the reasons and are appropriate to be made. I therefore propose to make orders in those terms with the following alterations:

(a)    to insert in proposed Order 4(a), after the word “any”, the word “further”;

(b)    to insert in proposed Order 7 the date “26 March 2020”; and

(c)    to insert in proposed Order 9 after “relief” the words “filed on 5 June 2019 as between the respondent and the second applicant”.

Associate:    

Dated:    7 February 2020