Federal Court of Australia

Senvion GmbH, in the matter of Senvion GmbH (No 3) [2020] FCA 1348

ORDERS

THE COURT ORDERS THAT:

1.    The application by the Deputy Commissioner for its costs in connection with the Recognition Proceeding be dismissed.

2.    The Deputy Commissioner have leave to discontinue its application pursuant to r 26.12(2)(c) of the Federal Court Rules 2011 (Cth) with no order as to costs.

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

REASONS FOR JUDGMENT

ANASTASSIOU J:

1    On 22 October 2019 I granted Australian recognition of formal insolvency proceedings (eröffnetes Insolvenzverfahren) commenced in Germany in relation to the plaintiff (Senvion), pursuant to the Cross-border Insolvency Act 2008 (Cth) (CBIA) (the Recognition Proceeding). I delivered judgment in Senvion GmbH, in the Matter of Senvion GmbH (No 2) [2019] FCA 1732; 140 ACSR 20 (Senvion No 2). These reasons concern the costs of the Recognition Proceeding incurred by an ‘interested person’ in those proceedings, the Deputy Commissioner of Taxation.

2    For the reasons that follow the application by the Deputy Commissioner is dismissed.

Background

3    The background to the present application is set out in Senvion No 2. Accordingly, these reasons should be read with the reasons in Senvion No 2.

4    The Recognition Proceeding was commenced by Originating Process dated 4 July 2019. The original Originating Process sought recognition of foreign insolvency of Senvion and, inter alia, relief under Articles 20 and 21 of the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency (Model Law). The Model Law is Schedule 1 to the CBIA and has force pursuant to s 6 of the CBIA. The form of stay sought was that akin to a stay arising under Part 5.3A of the Corporations Act 2001 (Cth) (CA). For reasons, and with consequences which will be examined below, on 7 October 2019 Senvion made an oral application to file an Amended Originating Process which no longer sought relief under Article 21 of the Model Law. By order dated 9 October 2019 I granted leave to Senvion to amend its Originating Process.

5    On 5 July 2019 the matter came on for urgent hearing before Lee J. At that hearing the Recognition Proceeding was opposed by entities referred to in Senvion No 2 as the Pacific Hydro Entities. The Pacific Hydro Entities were parties to a proceeding in the Supreme Court of Victoria with Senvion. That proceeding concerned inter alia, the delivery up of certain ‘keys’ to windfarms which had been designed and constructed and, once complete , managed the windfarms for the Pacific Hydro Entities. The ‘keys’ were the codes necessary to control the operation of the wind turbines (the Supreme Court Proceeding).

6    On 5 July 2019 Lee J delivered judgment in Senvion Gmbh, in the matter of Senvion Gmbh [2019] FCA 1124 (Senvion No 1). Lee J granted a stay to Senvion, preventing enforcement processes, encumbrances and proceedings being commenced generally, but allowing the Supreme Court Proceeding to continue.

7    The orders also required Senvion to provide notification to any creditors or potential claimants. One such creditor was the Deputy Commissioner, who at that time was owed around $9 million by Senvion in taxation debts (Debt). The matter came before me for case management on 2, 6 and 23 August 2019, over which an additional five groups of creditors appeared (being the Pacific Hydro Entities, and parties referred to as the Murra Warra parties, Downer Utilities, Consolidated Power Projects, and Nacap). The exact nature of those creditors’ interests are not presently relevant, save that before the hearing of the substantive application all but the Pacific Hydro Entities and the Deputy Commissioner had formally discontinued their intervention.

8    On 2 August 2019 the Deputy Commissioner filed a notice of appearance. On 19 August 2019 the Deputy Commissioner filed an interlocutory application seeking certain interlocutory relief. The Deputy Commissioner filed submissions on 22 August 2019. In effect, the Deputy Commissioner did not oppose the granting of recognition, however sought to exclude from the stay of claims arising upon recognition his claims over the Debt, and priority for any future debts owed to him, along with the appointment of “Australian Representatives” to monitor the insolvency:

3.     Pursuant to sections 6 and 16 of the Act and Articles 6, 20, 21 and/or 22 of the Model Law, either, when recognition is granted, the effects of the Model Law and the relief that applies and/or is sought by the First Respondent at the time of recognition of the German insolvency as a foreign main proceeding under the Model Law is adjusted as follows, or alternatively, after recognition, the effects of the Model Law and/or the relief that applies and is granted upon recognition of the German insolvency as a foreign main proceeding is modified as follows:

a.     For the purposes of Article 20(2) of the Model Law and section 16 of the Act, scope, and the modification or termination, of the stay and suspension referred to in Article 20(1) … not preclude or prevent the Commissioner of Taxation, or the Deputy Commissioner of Taxation, their servants or agents, from exercising any power or taking any step which he or they may otherwise lawfully exercise or take under the laws of which the Commissioner of Taxation has the general administration (including the TAA53), unless the exercise of the power or the taking of such a step would be precluded by operation of s 440D and s 440F of the Corporations Act”, or a declaration to that effect;

b.    Senvion must retain in Australia so much of its current and future Australian assets (or proceeds derived from, or received in respect of, such current and future Australian assets) as are sufficient to pay to the Commissioner of Taxation, or the Deputy Commissioner of Taxation, Taxation debts which are due, will become due, or are likely to become due, after the date of recognition of the German insolvency as a foreign main proceeding.

c.    If any Taxation debt becomes due after the date of recognition of the German insolvency as a foreign main proceeding, Senvion must not dispose of any Australian assets, or proceeds derived from, or received in respect of, any Australian assets, until that outstanding Taxation debt is paid.

d.    If any Taxation debt becomes due after the date of recognition of the German insolvency as a foreign main proceeding, that Taxation debt takes priority over any other creditor whatsoever (save for any Australian representative that is appo by this Court) in respect of Senvion's Australian assets, subject to any application that a creditor may make to modify this order.

e.    Until further order, Matthew Byrnes and Said Jahani of Grant Thornton Australia, Level 17, 383 Kent Street, Sydney, New South Wales, 2000 (the Australian Representatives) be jointly appointed to monitor the Australian assets and Australian operations of Senvion in the interests of the Australian creditors of Senvion, including the Commissioner of Taxation.

f.    [procedural orders regarding the role of the Australian Representatives]

4.    Costs of this application be paid by the Respondents to the Deputy Commissioner Taxation and such costs be paid out of Senvion's Australian assets in priority to any other claims against those Australian assets.

9    I note that the Australian Representatives aspect of the Deputy Commissioner’s claim was apparently novel in Australian recognition proceedings.

10    On 23 August 2019 the matter again came before me for case management. On 27 August 2019 I made orders granting the interested parties leave to intervene in the proceeding. I made procedural orders concerning the setting down of the originating process for hearing, and timetabled the filing of evidence and submissions by the interveners.

11    Between 27 August and 3 October 2019 the Deputy Commissioner and Senvion engaged in without prejudice discussions, the substance of which was not disclosed (and properly so).

12    On 13 September 2019 Senvion filed detailed submissions in support of its application and in opposition to both the Pacific Hydro Entities’ and the Deputy Commissioner’s applications. Paragraph 94 of the submissions stated:

On 6 September 2019, Hall and Wilcox, solicitors for Senvion, wrote to Dentons, solicitors for the Deputy Commissioner, and advised that Senvion would not press any application for relief under art 21 of the Model Law at the hearing of this proceeding. As no relief under art 21 will be granted, there is no role for art 22 to play: Akers [v Deputy Commissioner of Taxation (2014) 223 FCR 8], 22 [60]; [Tai-Soo Suk v Hanjin Shipping Co Ltd [2016] FCA 1404], [44].

13    Accordingly, by 6 September 2019 at the latest the Deputy Commissioner was aware that relief on the basis of Art 21 was not to be pressed. In its 6 September communication Senvion foreshadowed that it would seek leave to amend the Originating Process to remove reliance on Article 21 for relief. The Deputy Commissioner opposed that application on the basis that the Court may then lack jurisdiction to hear and determine the Deputy Commissioner’s application (Costs subs at [9]). The Deputy Commissioner seeks his costs up until 13 September 2019 on the basis that the first document filed with the Court that acknowledges the withdrawal of the Article 21 relief was the submissions referred to above.

14    On 4 October 2019 the Deputy Commissioner notified the Court by email that he was withdrawing his interlocutory application. He did not, however, file a notice of discontinuance. His submissions filed in support of the present application for costs seek relief by way of an order that a notice of discontinuance may be filed pursuant to rule 26.12(2)(c) of the Federal Court Rules 2011 (Cth) without any order as to costs. This relief is not opposed by Senvion.

15    Ultimately, only the Pacific Hydro Entities contested the granting of recognition. The Pacific Hydro Entities amended their application to include an alternative application under s 440D(1) of the CA to be granted leave to proceed with the Supreme Court Proceeding. On 22 October 2019 I gave judgment in Senvion No 2, granting the recognition sought by Senvion and also granting leave to the Pacific Hydro Entities to proceed with the Supreme Court Proceeding under s 440D(1) of the CA.

The Deputy Commissioner’s application for costs

16    At the hearing for handing down Senvion No 2 the present dispute about costs was raised by counsel. Counsel for the Deputy Commissioner in particular made submissions in support of its costs being awarded. I said as follows:

HIS HONOUR: Well, let me tell you, I don’t propose to hear any argument as to costs today. If you want to press costs, you can put some submissions in writing, but let me say this. In relation to the application that was contested, Senvion was successful in connection with its application for recognition, but unsuccessful in its opposition to the application for leave to proceed. The Pacific Hydro Entities, on the other hand, were successful in their application for leave to proceed; unsuccessful in their application to alter the scope of the stay, rather than being given leave to proceed under section 440D. So I would call that, in a sense, a draw. Now, if you want to try and persuade me to the contrary, I will read what you put in writing, and if you are going to do so, you should consider also that this is not normal inter parties litigation where you have a clearly successful or unsuccessful plaintiff or defendant as the case may be. Senvion needed to seek recognition of the proceeding, as was its right, but needed to move the court.

The Pacific Hydro entities, if they were to continue with their proceeding, needed to either obtain a carve-out of the stay provision or obtain leave to proceed. So this was a case on both sides where there was a legal reason to move the court in the interests of the party moving the court. Now, it seems to me in those circumstances and where each party has been partially successful and partially unsuccessful, my inclination, unless you give me compelling reasons to the contrary, would be to make no order as to costs.

17    In relation to the Deputy Commissioner’s potential application for costs, I said:

HIS HONOUR: Mr Bender, it is an odd circumstance, it seems to me, that an intervening party, who was given leave to intervene, was put on an interlocutory process, but then for whatever reason I haven’t been informed of, and I’m not expecting to be told why, but took no part in the substantive application, it is of some surprise to me that we’re now going to have an argument about costs. I would have thought that’s something that would and should been resolved as part of whatever discussions occurred that led to the abandonment of any substantive argument so far as the Commissioner’s position was concerned.

18    I directed that all parties wishing to disturb the presumptive position that costs lie where they fall, file and serve written submissions and other material and that the application would be determined on the papers. The Deputy Commissioner did so, and Senvion filed material in response.

19    The Court has a broad discretion under s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) to award costs. The Deputy Commissioner accepted that costs typically follow the event, however noted that the Court’s broad discretion extends to making no order for costs in favour of a successful litigant: see Coombes v Registrar of Aboriginal Corporations (No 2) [2008] FCA 1078 at [29]; Donald Campbell & Co v Pollack [1927] AC 732 at 810-812.

20    The Deputy Commissioner submitted that the general principle that costs follow the event may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome: Northern Territory v Sangare [2019] HCA 25; 265 CLR 164; 93 ALJR 959; 372 ALR 117 at [25]. This was said to be exemplified in the following cases:

Where the litigant has not succeeded on the merits of his case but for other reasons, for example, on a technicality: see Williamson v Bors (1900) 21 LR (NSW) Eq 302;

Where there is conduct which induced the other party to the litigation to believe that they had a good cause of action: Coombes v Registrar of Aboriginal Corporations (No 2) [2008] FCA 1078 at [29]; Northern Territory v Sangare [2019] HCA 25 at [25] and the cases cited therein; and

Where a party has facilitated the loss of the opportunity to expeditiously dispose of the case, for example, where a party could have made an amendment to their case earlier and if the other party has invested costs in the action prior to the amendment, or the other party may well have taken a different view of their stance in the proceeding if the amendment had been made earlier: Barry Edward and Thelma June Harrington v Greenwood Grove Estate Pty Ltd (No. 2) [2011] NSWSC 1598 at [8]-[14]; Bonic v Pacific General Securities Ltd [2009] NSWSC 1221 at [14]; Capolingua v Phylum Pty Ltd (1991) WAR 137; Smith v Gould (No 2) [2012] VSC 541 at [11].

21    The Deputy Commissioner’s submissions amount, in effect, to an assertion that Senvion did not ‘succeed’ in respect of its application against the Deputy Commissioner, and that in any event Senvion should be ordered to pay costs otherwise. This submission was founded upon the following propositions as follows:

    Senvion’s Originating Process was made on the basis of, inter alia, Arts 20-22;

    The Deputy Commissioner’s application took as its “key jurisdictional foundation” relief under Art 22, which requires an order being made under Art 21;

    On this basis, the Deputy Commissioner filed material in support of its application and correspondingly incurred costs;

    Senvion notified the Deputy Commissioner and the Court that it would not be pressing for relief under Art 21 in September after receipt of the Deputy Commissioner’s submissions;

    Senvion has not formally withdrawn its prayer for relief sought under Art 21, and nor has it formally sought leave to amend its Originating Process (and such amendment the Deputy Commissioner would have opposed);

    There has been no hearing on the merits of the Deputy Commissioner’s application;

    Taking the above in combination, the Deputy Commissioner’s application was withdrawn “based on a technicality” and costs should not follow the event in the usual way.

22    Before considering the substance, I note that Senvion did seek to formally amend its Originating Process orally in the course of the hearing of the application on 7 October 2019. I granted it leave to do so, the Deputy Commissioner having by this point withdrawn his application and not appearing at the hearing.

23    The Deputy Commissioner's submissions were premised on his characterisation of the application as one taking Arts 21 and 22 as its “key jurisdictional foundation”. Though it is true that the majority of the relief sought did fall under this Article, relief was also sought under Arts 6 and 20 of the Model Law. Senvion’s decision not to press relief sought under Art 21 did not preclude the Deputy Commissioner continuing with its application for relief under Arts 6 and 20.

24    The Deputy Commissioner’s submissions characterised the relief under Art 20 as being sought “merely as a matter of clarification out of an abundance of caution”, and that the Art 21 relief was the “core” of his application. However, the Deputy Commissioner nonetheless elected not to continue his application for that relief. In relation to the Deputy Commissioner’s contention that he would have opposed any application to amend the Originating Process, it was open to the Deputy Commissioner to continue to press his application pending an application by Senvion to amend its Originating Process, but he did not do so.

25    A further factor which influences the exercise of my discretion is the difficulty conceiving what Senvion could have done differently in the circumstances. Senvion needed to apply for recognition. It was not seeking this relief against the Deputy Commissioner, but rather recognition of the foreign insolvency. Senvion had no choice but to seek recognition. The Deputy Commissioner on the other hand intervened to best secure his interests. The Deputy Commissioner’s original interlocutory application sought relief from the consequences of Article 21.

26    In my view, both Senvion and the Deputy Commissioner acted reasonably to protect their respective interests. Having regard also to the nature of Senvion’s application, the fairest outcome on the question of costs is that they should lie where they fall. Accordingly, I reject the Deputy Commissioner’s application for costs. Although the Deputy Commissioner has been unsuccessful in his application for costs, it was not unreasonable for him to make the application, and consistent with the exercise of my discretion in relation to the principal application, I propose to make no order for costs in connection with this application.

Disposition

27    The Deputy Commissioner’s application for costs will be dismissed with no order for costs. The Deputy Commission will have leave to file its notice of discontinuance with no order for costs.

Associate:

Dated:    21 September 2020

SCHEDULE OF PARTIES