Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 6) - [2020] FCA 928

FEDERAL COURT OF AUSTRALIA
Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 6) [2020] FCA 928

File number: SAD 12 of 2018

Judge: BESANKO J

Date of judgment: 6 July 2020

Catchwords:
COSTS — where the proceeding concerned a number of claims made by the plaintiff, namely a claim in debt as against the first defendant, a claim that the first, fourth, fifth and sixth defendants engaged in misleading or deceptive conduct, a claim that the first, fourth, fifth and sixth defendants committed a breach of trust or fiduciary duty, a claim that the first defendant contravened s 286 of the Corporations Act 2001 (Cth), and a claim that the deed of company arrangement to which the first defendant was subject be terminated or set aside on various bases — where the plaintiff succeeded on the Debt Claim, the Claim for a contravention of s 286 and the DOCA Claim, but not on the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim

COSTS — where the plaintiff seeks an order that the defendants pay its costs of the proceeding — whether the various claims are sufficiently distinct — consideration of the appropriate apportionment of costs — where the plaintiff seeks an order in the alternative that it be awarded its costs of the Debt Claim and the DOCA Claim on an indemnity basis

COSTS — where the plaintiff also seeks an order that the fourth to sixth defendants pay the first defendant’s costs of and incidental to the proceeding, including its liability to pay costs to the plaintiff — whether it is appropriate to treat the first defendant and the fourth to sixth defendants as, in effect, one party

COSTS — whether the second and third defendants should be deprived of their right of indemnity out of the assets of the first defendant in respect of their liability for the plaintiff’s costs and in respect of their own costs — whether the orders sought by the plaintiff in relation to the second and third defendants’ right of indemnity are “costs orders” and ought to have been pleaded — where the first defendant was represented by the fourth to sixth defendants and not the second and third defendants — where the second and third defendants participated in the proceeding for the asserted purposes of assisting the Court and defending allegations made by the plaintiff against them — whether such purposes engage the right of indemnity

Legislation:
Corporations Act 2001 (Cth) ss 286, 443A, 443B, 443BA, 443C, 443D, 443E, 443F, 444A, 445D, 445H, 556, 600K

Federal Court of Australia Act 1976 (Cth) s 43

Corporations Regulations (2001) (Cth) Sch 8A, reg 5.3A.05

Federal Court (Corporations) Rules 2000 (Cth) r 2.8(3)

Insolvency Practice Schedule (Corporations) 2016 (Sch 2 to the Corporations Act 2001 (Cth)) ss 5-15, 5-20, 90-15, 90-20

Cases cited:
Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) [2018] FCA 315

Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2018] FCA 1003

Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 3) [2018] FCA 1058

Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 4) [2019] FCA 1846

Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 5) [2019] FCA 1914

Adsett v Berlouis (1992) 37 FCR 201

Cadwallader v Bajco Pty Ltd [2002] NSWCA 328

Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225

Cresvale Far East v Cresvale Securities (No 2) [2001] NSWSC 791; (2001) 39 ACSR 622

Deputy Commissioner of Taxation v BE100 Property Investments Pty Ltd [2016] FCA 597

Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807

In re Elgindata Ltd (No 2) (1992) 1 WLR 1207

Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21

Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61

Mannigel v Aitken (1983) 77 FLR 406

Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1993) 47 FCR 81

Morad v El-Ashey (No 2) [2017] FCA 1612

Naomi Marble and Granite Pty Ltd v FAI General Insurance Co Ltd (No 2) (1999) 1 Qd R 518

Probiotec Ltd v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30

Re Beddoe; Downes v Cottam [1893] 1 Ch 547

Re Talk Finance and Insurance Services Pty Ltd (1994) 1 Qd R 558

Sydney Land Corporation Pty Ltd v Kalon Pty Ltd (1997) 142 FLR 188

Total Spares & Supplies Limited v Antares SRL [2006] EWHC 1537 (Ch)

Walters v Woodbridge [1878] 7 Ch D 504

Dal Pont GE, Law of Costs (4th ed, LexisNexis Butterworths, Australia, 2018)

Dates of hearing: 11 December 2019, 20 May 2020

Registry: South Australia

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 170

Counsel for the Plaintiff: Mr M Livesey QC with Mr S Foreman (11/12/2019)

Mr S Foreman (20/5/2020)

Solicitor for the Plaintiff: Lipman Karas

Counsel for the First, Fourth, Fifth and Sixth Defendants: Mr T Duggan QC (11/12/2019)

Counsel for the Fourth, Fifth and Sixth Defendants: Mr M Jackson (20/5/2020)

Solicitor for the Fourth, Fifth and Sixth Defendants: Crawford Legal

Counsel for the Second and Third Defendants: Mr I Robertson SC with Ms S Heidenreich

Solicitor for the Second and Third Defendants: O’Loughlins Lawyers

ORDERS

SAD 12 of 2018

IN THE MATTER OF CONCRETE SUPPLY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

BETWEEN:
ADELAIDE BRIGHTON CEMENT LIMITED ACN 007 870 199

Plaintiff

AND:
CONCRETE SUPPLY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 007 848 580

First Defendant

DOMINIC CHARLES CANTONE IN HIS CAPACITY AS ADMINISTRATOR OF CONCRETE SUPPLY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

Second Defendant

NICHOLAS DAVID COOPER IN HIS CAPACITY AS ADMINISTRATOR OF CONCRETE SUPPLY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (and others named in the Schedule)

Third Defendant

JUDGE:

BESANKO J

DATE OF ORDER:

6 JULY 2020

THE COURT ORDERS THAT:
1.The application for costs and other orders be adjourned for submissions (if any) on the form of the proposed orders as set out in [119] of the reasons delivered this day to Thursday, 9 July 2020 at 9.15 am.

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

REASONS FOR JUDGMENT
BESANKO J:
Introduction

These reasons address the issue of costs in a proceeding in the Court and the issue of the right of indemnity of deed administrators who were parties to the proceeding. The proceeding was commenced on 17 January 2018 and it involved a number of complex legal and factual issues. Various disputes arose in the course of the interlocutory stages of the proceeding and I delivered reasons and made orders in relation to those disputes (Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) [2018] FCA 315; Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2018] FCA 1003; Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 3) [2018] FCA 1058). The proceeding came on for trial and the trial extended over a period of 20 sitting days. I delivered reasons for judgment on 12 November 2019 (Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 4) [2019] FCA 1846 (the substantive reasons)) and I made orders that the plaintiff file and serve draft minutes of order which reflected the conclusions expressed in those reasons and contain such other orders as it sought on or before 9.30 am on 13 November 2019, and that the matter be adjourned to that date at 4.30 pm for the making of final orders. I heard submissions on the final orders which should be made, other than as to costs, and I made final orders on 19 November 2019 and delivered reasons for those final orders (Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 5) [2019] FCA 1914 (the reasons for the final orders)).
The issue of costs remains outstanding. The right of indemnity of the deed administrators is also an issue.
These reasons should be read with the substantive reasons and the reasons for the final orders. In these reasons, I will describe the parties in the same way in which I did in the substantive reasons, save and except for the fact that I will refer to the second and third defendants, Mr Cantone and Mr Cooper, as the deed administrators. I do that because the costs which are in issue, and which are the subject of these reasons, are costs incurred during the role of the second and third defendants as deed administrators.
On 13 November 2019, I made various orders designed to facilitate the resolution of outstanding issues as to costs. As will become apparent from the chronology of events set out below, the issue of costs has been complicated by a number of matters.
The Matters which have arisen in relation to the Issue of Costs
The relief sought in the Originating Process whereby this proceeding was commenced is set out in the substantive reasons (at [15]). Among the types of relief sought are costs and such further or other order as the Court thinks fit. The Originating Process does not contain an express claim for relief directed to the deed administrators’ right of indemnity with respect to any costs orders made against them, or in respect of their own costs. The deed administrators submit that that is significant and it is a point to which I will return.
The procedural orders I made on 13 November 2019 culminated in an order that the issue of costs be adjourned to 11 December 2019 for oral submissions.
ABCL’s Written Submission on Costs is dated 22 November 2019. ABCL seeks the following orders as to costs:
(1)The six defendants to the proceeding pay ABCL’s costs of the proceeding, to be taxed if not agreed. In the alternative, ABCL submits that it ought to be awarded its costs of the Debt Claim and of the DOCA Claim on an indemnity basis. The nature of these claims is described below (at [37]–[44]).
(2)The directors pay Concrete Supply’s costs of and incidental to the proceeding, including Concrete Supply’s liability to ABCL under Order (1).
(3)The deed administrators’ costs of and incidental to the proceeding, including their liability to ABCL under Order (1), be paid by them without recourse to the assets of Concrete Supply.
ABCL’s application for costs was supported by an affidavit of Mr Patrick Leader-Elliott affirmed on 22 November 2019. Mr Leader-Elliott is a senior associate employed by the firm, Lipman Karas. Lipman Karas acts for ABCL in this proceeding. Subject to one qualification, Mr Leader-Elliott’s affidavit was received and he was not required for cross-examination. The qualification is that paragraphs 5 to 8 inclusive of his affidavit were received as submissions and not as evidence.
The deed administrators’ Written Submission on Costs is dated 2 December 2019. They oppose the costs orders sought by ABCL. In their written submission, the deed administrators submit that no order for costs should be made against them. At the hearing of submissions as to costs on 11 December 2019, they conceded that an order that they pay ABCL’s costs with respect to the DOCA Claim was appropriate, subject to the qualification that the order for costs be limited to the assets of the company. The form of the order they proposed is the same as the form of the order made by Greenwood J in Deputy Commissioner of Taxation v BE100 Property Investments Pty Ltd [2016] FCA 597 (Deputy Commissioner of Taxation v BE100 Property Investments) and the deed administrators submit that it is the appropriate order in this case. The deed administrators also seek an order that their costs of and incidental to the proceeding be paid out of the assets of Concrete Supply. It is important to note the scope of the order the deed administrators seek. It relates to the costs of the proceeding and does not relate to their remuneration and it does not relate to costs incurred prior to the commencement of the proceeding.
The deed administrators filed an affidavit in support of their application for costs and in opposition to ABCL’s application for costs. It is an affidavit of Mr Samuel Black sworn on 2 December 2019. Mr Black is a partner in the firm, O’Loughlins Lawyers. They are the lawyers for the deed administrators. Mr Black was not required for cross-examination.
The Concrete Supply defendants’ Submissions on costs are not dated, but were filed on 2 December 2019. The Concrete Supply defendants are the company and the directors. At that point in time, Crawford Legal continued to act for the company as well as the directors. The final orders I made on 19 November 2019 included an order that the Deed of Company Arrangement executed on 21 December 2017 (the DOCA) be terminated pursuant to s 445D of the Corporations Act 2001 (Cth), and an order that Messrs Martin Lewis and David Kidman be appointed as joint and several liquidators of the first defendant. However, I also made an order that those orders be stayed until 17 December 2019.
The Concrete Supply defendants oppose the orders for costs sought by ABCL. The orders as to costs which they submit are appropriate are as follows:
(1)Concrete Supply pay the party and party costs of ABCL in respect of those aspects of the proceeding to which Concrete Supply pleaded in its Defence, being the Debt Claim, the DOCA Claim and the claim for a contravention of s 286 of the Corporations Act. The Concrete Supply defendants submit that the ambit of the dispute as to costs between them and ABCL on these issues is limited to whether costs should be awarded on an indemnity basis.
(2)The director defendants be paid their costs of the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim on a party and party basis. These claims are described below (at [37]–[44]). The Concrete Supply defendants submit that the ambit of the dispute as to costs between the directors and ABCL is as follows:
(a)whether ABCL should be liable to pay their costs, or whether the directors should pay ABCL’s costs on an indemnity basis (or at all) despite ABCL being unsuccessful; and
(b)whether the directors should indemnify Concrete Supply for its unsuccessful defence of the claims against Concrete Supply.
(3)The costs awarded against the deed administrators should be paid from their own resources and not from the Deed Fund, and that as between Concrete Supply and the deed administrators, there should be an apportionment or, alternatively, a contribution, for those costs on the basis that the deed administrators pay 75% of the costs awarded in favour of ABCL in respect of the Debt Claim, the DOCA Claim and the claim for a contravention of s 286 of the Corporations Act or (and it is not entirely clear) simply in relation to the DOCA Claim.
The Concrete Supply defendants’ application in respect of costs is supported by an affidavit of Mr Mark Jackson affirmed on 2 December 2019. Mr Jackson is a partner of Crawford Legal and he has had the day-to-day conduct of this proceeding on behalf of the Concrete Supply defendants. The Concrete Supply defendants’ application with respect to costs is also supported by an affidavit of Mr Albert D’Alessandro sworn on 29 November 2019. At that time, Mr D’Alessandro was the chief financial controller of Concrete Supply. He was a witness at the trial and is referred to in the substantive reasons in a number of places and, in particular, at [498]–[541]. Neither Mr Jackson nor Mr D’Alessandro were required for cross‑examination.
The deed administrators’ Written Submissions Inter Se On Costs are dated 9 December 2019. A point to note, for reasons which will become clear, is that those submissions include a submission by the deed administrators that the contention by both ABCL and the Concrete Supply defendants that the deed administrators’ costs are not to be recovered from Concrete Supply has no foundation in the case as pleaded or presented. In a footnote to that submission, the deed administrators assert that there is no pleaded relief to the effect sought by ABCL against the deed administrators that they be denied their indemnity according to statute or the DOCA and they refer to both the Originating Process and the Statement of Claim.
ABCL’s Reply Submission on costs is dated 9 December 2019.
The parties were heard in support of their submissions as to costs on 11 December 2019. One matter arose in the course of those submissions which I must address.
In the course of its submissions, ABCL referred to the decision of Austin J at first instance in Cresvale Far East v Cresvale Securities (No 2) [2001] NSWSC 791; (2001) 39 ACSR 622 (Cresvale Far East). The deed administrators referred to the decision of the Court of Appeal in the same case: Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21 (Kirwan v Cresvale Far East) and in the course of their submissions, asked me to note that s 447E(1) of the Corporations Act, upon which Austin J had relied to make certain orders with respect to the deed administrator’s right of indemnity, had been repealed. This prompted counsel for ABCL to seek leave to make a short submission tracing the legal basis for challenging the deed administrators’ right of indemnity. I made an order that each party had leave to file and serve written submissions relevant to the legal basis for the challenge to the administrators’ right of indemnity limited to one page by 4 pm on 13 December 2019.
ABCL’s Supplementary Written Submission on Costs is dated 12 December 2019. In those submissions, ABCL submits that this Court has the power to make the third costs order it seeks under s 90‑15 of the Insolvency Practice Schedule (Corporations) 2016; and/or under s 43 of the Federal Court of Australia Act 1976 (Cth). It submits that, although the deed administrators are correct to say that s 447E had been repealed, the point is an arid one. Section 90-15 is in Sch 2 to the Corporations Act which is the Insolvency Practice Schedule (Corporations). Section 600K of the Corporations Act provides that Sch 2 has effect. Section 600K came into effect on 1 March 2017. It is convenient at this point to set out the relevant provisions of s 90‑15:
90-15 Court may make orders in relation to external administration
Court may make orders
(1)The Court may make such orders as it thinks fit in relation to the external administration of a company.
Orders on own initiative or on application
(2)      The Court may exercise the power under subsection (1):
(a)       on its own initiative, during proceedings before the Court; or
(b)       on application under section 90-20.
Examples of orders that may be made
(3)Without limiting subsection (1), those orders may include any one or more of the following:
(a)an order determining any question arising in the external administration of the company;
(b)an order that a person cease to be the external administrator of the company;
(c)an order that another registered liquidator be appointed as the external administrator of the company;
(d)an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company;
(e)an order in relation to any loss that the company has sustained because of a breach of duty by the external administrator;
(f)an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company.
…
Costs orders
(5)Without limiting subsection (1), an order mentioned in paragraph (3)(d) in relation to the costs of an action may include an order that:
(a)the external administrator or another person is personally liable for some or all of those costs; and
(b)the external administrator or another person is not entitled to be reimbursed by the company or its creditors in relation to some or all of those costs.
Orders to make good loss sustained because of a breach of duty
(6)Without limiting subsection (1), an order mentioned in paragraph (3)(e) in relation to a loss may include an order that:
(a)the external administrator is personally liable to make good some or all of the loss; and
(b)the external administrator is not entitled to be reimbursed by the company or creditors in relation to the amount made good.
Section does not limit Court’s powers
(7)This section does not limit the Court’s powers under any other provision of this Act, or under any other law.

The deed administrators’ Supplementary Submissions are dated 13 December 2019. In those submissions, the deed administrators submit that ABCL’s supplementary submissions on costs dated 12 December 2019 seek to do more than is permitted by the grant of leave. They submit that to the extent the Court has regard to the further submissions of ABCL, the following matters should be considered as well:
3.…
(b)The removal or denial of the Administrator Defendants’ statutory and contractual rights of indemnity are not “cost orders”. They are special orders that should have been pleaded and, then, proved to have been engaged in this case. To the extent that this is described as a “recent invention” of the Administrator Defendants, that evidentiary concept is of no relevance at this point in the proceedings and, in any event, cannot obviate the plaintiff’s obligation to have identified the source of power it relies upon and the justification for its application to both the Administration and the DOCA;
(c)The Administrator Defendants accept that the Court has power under s 90-15 to make wide ranging orders about an external administration. We note that the Act defines “administration” and “administrator”, but not “external administration” or “external administrator”. The latter two definitions are contained in sections 5-15 and 5-20 respectively of the Schedule;
…
I consider the effect of these submissions below.
After I had reserved my decision, and upon considering the matter, it seemed to me that it might be appropriate to apportion costs between the parties and between the issues. The parties had not addressed those issues, or at least had not addressed them at any length. In those circumstances, I decided to give the parties the opportunity to make further written submissions on the following matters:
1.An appropriate division in percentage terms of the costs of the issues relating to the Deed of Company Arrangement on the one hand (the DOCA issues), and all other issues in the case, on the other (the non DOCA issues).
2.With respect to the non DOCA issues, an appropriate division in percentage terms of the costs of the issues relating to the misleading or deceptive conduct and unconscionable conduct claim and the breach of trust or fiduciary duty claim on the one hand, and all other non DOCA claims on the other.
ABCL’s Further Submission on Costs is dated 31 January 2020. The deed administrators’ Supplementary Submissions on Apportionment of Costs are dated 21 February 2020. The directors’ Further Submissions on Costs are undated, but were filed on 21 February 2020. I say the directors’ Further Submissions on Costs because by that stage, the stay of the final orders which I had ordered had expired and the appointment of the liquidators had taken effect. The liquidators of Concrete Supply wrote to the Court indicating that they did not intend to put any position on behalf of Concrete Supply other than that they would abide by the orders of the Court.
The deed administrators’ Reply Submissions Apportionment of Costs, are dated 28 February 2020 and ABCL’s Reply Submissions on Costs are also dated 28 February 2020.
There were then two further issues which arose and they both relate to the deed administrators’ right of indemnity in relation to costs which they are ordered to pay another party and their own costs.
The Power of the Court to make an Order with respect to the Deed Administrators’ Right of Indemnity
As I will explain later in these reasons, the sources of the deed administrators’ right of indemnity against Concrete Supply in this case are the general law and the DOCA which was executed on 21 December 2017 by Concrete Supply, the deed administrators and the directors. The deed administrators also made reference to s 443D of the Corporations Act, but as I will explain, that section provides a right of indemnity to an administrator, and not to a deed administrator.
For the purposes of understanding the position of the respective parties, it is important to distinguish between a claim by deed administrators that they are entitled to be indemnified with respect to a costs order against them, and a claim by deed administrators that they are entitled to be indemnified with respect to their own costs. The third costs order sought by ABCL addresses both of these matters in the one order and seeks an order that has the effect that there is no right of indemnity with respect to these costs. By contrast, the two orders sought by the deed administrators separate the two types of liability. As I have said, the first order sought by the deed administrators is that ABCL’s costs order against them with respect to the DOCA be limited to the assets of the company. As I understand it, that raises an issue as to the deed administrators’ right of indemnity. It seems to me to be an order as to costs in the proceeding because it affects the costs which may be recovered by the successful party. That was noted by Greenwood J in Deputy Commissioner of Taxation v BE100 Property Investments in which, as I have said, his Honour made such an order. His Honour said (at [85]):
… That may well mean that the costs order is, in practical terms, of no particular value to the DCOT but it nevertheless reflects a principled approach to the exercise of the discretion in the circumstances of the case.
The second order sought by the deed administrators is, it will be recalled, that their costs of and incidental to the proceeding be paid out of the assets of Concrete Supply. That plainly raises an issue as to the scope or extent of the deed administrators’ right to an indemnity in the particular circumstances.
On considering the matter, I was concerned to understand the precise import of the particular submissions in paragraphs 3(b) and (c) of the deed administrators’ Supplementary Submissions dated 13 December 2019 and set out above (at [19]). In particular, I was concerned to understand the effect of the submission that the “removal or denial” of the deed administrators’ statutory or contractual rights of indemnity were not “costs orders” and the earlier complaint they made about the fact that ABCL did not seek relief in its pleadings to the effect that the deed administrators be denied their indemnity according to statute or the DOCA (see at [14] above). I was concerned to understand how these submissions were consistent with the fact that, on the face of it at least, the first order sought by the deed administrators was a costs order and raised an issue as to the deed administrators’ right of indemnity, and the second order sought by the deed administrators clearly raised an issue as to their right of indemnity.
In those circumstances, I called the parties back and asked the deed administrators to address me on these aspects of their submissions. Counsel for the deed administrators said that they do not contend that the Court did not have power to make the orders sought. Counsel submitted that it was only a question of fairness and that they had made their submissions about that. I take that to be a reference to the submission that an order denying the right of indemnity is not pleaded by ABCL. I said to counsel for the deed administrators that if he wished to make a submission that they should be given a further opportunity of some sort, then he would need to identify that. He did not make a submission to that effect.
Finally, in terms of matters affecting the issues of costs, I note that s 90-20 identifies the persons who may apply for an order under s 90‑15 and that r 2.8(3) of the Federal Court (Corporations) Rules 2000 (Cth) provides as follows:
Notice of certain applications to be given to ASIC
(1)This rule has effect in addition to the requirements of the Corporations Act that, in relation to a proceeding, particular documents are to be served on ASIC or notice of particular matters is to be given to ASIC.
(2)This rule does not apply to a person making an application if the person is ASIC or a person authorised by ASIC.
(3)Unless the Court otherwise orders, if a person makes an application under a provision of the Corporations Act mentioned in column 2 of an item of the following table, the person must serve on ASIC, a reasonable time before the hearing of the application, a copy of the originating process, or interlocutory process, and supporting affidavit in respect of the application.

Item Provision Description of application

… … …

12 Section 90-20 of the Insolvency Practice Schedule (Corporations) For an order under section 90-15 of the Insolvency Practice Schedule (Corporations) in relation to the external administration of a company

I made a direction in chambers on 1 June 2020 to the following effect:
1.The plaintiff within two days provide the Australian Securities and Investments Commission (ASIC) with the following:
(a) a copy of the Originating process;
(b)notice of the orders sought by the various parties as set out in the respective submissions of the parties;
(c)advice that notice is being given to ASIC because of the reliance placed on s 90 15 of the Insolvency Practice Schedule (Corporations);
(d)a reference to the reasons that the Court delivered on 12 November 2019 and 19 November 2019 respectively;
(e)notice that the submissions and affidavits on the costs applications will be provided upon request; and
(f)notice that should ASIC wish to intervene, or take any other steps with respect to the application of the parties, then, among such other matters as may be necessary, it should provide advice to the Associate to the Honourable Justice Besanko at [email protected] within 7 days of the notice.
The Australian Securities and Investments Commission has indicated that it does not propose to intervene on the topic of the costs of the proceeding or seek leave to appeal.
The power of this Court to award costs in all proceedings before the Court is contained in s 43 of the Federal Court of Australia Act. The award of costs is in the discretion of the Court or judge (s 43(2)). In my view, it must be within the jurisdiction of the Court to determine the order as to costs as between ABCL and the deed administrators. ABCL seeks an order that costs be paid by the deed administrators personally, while the deed administrators seek an order that their liability for costs be limited to the assets of the company. By its terms, the order sought by the deed administrators raises an issue as to the deed administrators’ right of indemnity against the assets of Concrete Supply. Therefore, an issue as to the deed administrators’ right of indemnity arises in the course of the Court’s exercise of its power as to costs.
In this case, the same result in terms of the deed administrators’ right of indemnity applies whether one is considering the costs the deed administrators are ordered to pay ABCL, or the deed administrators’ own costs. Whether that of itself gives the Court power under its power to make orders as to costs in relation to the deed administrators’ own costs may be debated, but in the circumstances, it is plainly convenient if both matters for which there will be one answer are considered at the same time. This Court has jurisdiction to determine whether the deed administrators are entitled to an indemnity in respect of their own costs under s 90‑15 of Sch 2 of the Corporations Act. The examples of the orders that may be made under s 90‑15(1) include an order determining any question arising in the external administration of the company and an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company (s 90-15(3)(a), (d)). Section 90-15(5) provides that an order under s 90-15(3)(d) in relation to the costs of an action may include an order that the external administrator and another person is personally liable for some or all of those costs and the external administrator or another person is not entitled to be reimbursed by the company or its creditors in relation to some or all of those costs. I should also record that ss 5-15 and 5-20 provide, among other things, that a company is taken to be under external administration if a deed of company arrangement has been entered into in relation to the company and a person is an external administrator of the company if the person is the administrator under a deed of company arrangement that has been entered into in relation to the company. In this case, a deed of company arrangement was entered into in relation to Concrete Supply and the deed administrators are administrators under that deed of company arrangement.
In summary, I have the power to determine whether the deed administrators have a right of indemnity with respect to the costs of the proceeding they are ordered to pay to ABCL by reason of the power I have to make orders as to the costs of the proceeding. If I am wrong about that, I have such power under s 90‑15 in Sch 2 of the Corporations Act. I have the power under s 90‑15 to determine whether the deed administrators’ right of indemnity extends to their own costs of the proceeding.
The deed administrators’ complaint that there has been a lack of notice by ABCL that their right of indemnity was challenged, and therefore unfairness to them, must be rejected for a number of reasons. First, the complaint is inconsistent with the very orders that the deed administrators now seek. Secondly, it is not clear to me that notice is required and that the correct position is not that the deed administrators need to ensure that their liabilities are properly incurred within the authorities which are discussed below. Thirdly, insofar as the deed administrators rely on the absence of notice in the Originating Process, that does not seem to be sustainable because the course of conduct that led to the costs had not at that point been undertaken. Fourthly, the deed administrators had the opportunity to put before the Court such evidence and submissions as they may be advised with respect to the challenge to their right of indemnity. Finally, it is relevant to note that the deed administrators were given notice by ABCL shortly prior to trial that there would be a challenge to their right of indemnity with respect to the costs of the proceeding.
The solicitors acting for ABCL wrote to all six defendants shortly prior to trial, namely on 28 November 2018, and said in relation to the deed administrators that they consider that the deed administrators “will be personally liable for the cost of defending the present litigation and all remuneration taken by them in connection with this administration together with disbursements paid by them will be ordered to be restored to the company”. The solicitors for ABCL went on to assert that if ABCL was successful and Concrete Supply was placed into liquidation, then all monies expended in connection with the DOCA would need to be restored to Concrete Supply for the benefit of its creditors. The solicitors sought confirmation from the deed administrators that they would not use any of Concrete Supply’s funds under their control to pay the costs of defending the action.
Further, I note that although after the trial, the solicitors for ABCL wrote to the solicitors for the deed administrators saying, among other things, the following:
Your clients were, on their own concession, participating in the litigation to justify their conduct and defend themselves against potential findings of misconduct or mal‑administration. Their costs of doing so are personal costs and should be borne by your clients or by their professional indemnity insurers. The costs were not incurred for the benefit of the company, its administration or the deed administration so are not costs which can properly be imposed on the administration or deed administration.
Further and in any event, if (as we expect will be the case) the Court ultimately makes findings of serious misconduct against your clients, we are instructed to seek orders that your clients personally pay: (i) our client’s costs of the proceedings; and (ii) their own costs of the proceedings, without recourse to the assets of the company or the Deed Fund. If such orders are made it will render otiose the resolution which your clients have put to creditors.
Classification of ABCL’s Claims for Relief
In the substantive reasons, I organised ABCL’s claims as follows: (1) ABCL’s Claim in Debt (the Debt Claim); (2) Section 286 of the Corporations Act 2001 (Cth); (3) the Misleading or Deceptive Conduct Claim and Unconscionable Conduct Claim, and Breach of Trust or Fiduciary Duty Claim; and (4) ABCL’s Challenge to the Deed of Company Arrangement (the DOCA Claim).
As I have said, ABCL’s claims in the Originating Process are set out in the substantive reasons (at [15]).
The claim for relief in paragraph 9 relates to the Debt Claim.
The claim with respect to a contravention of s 286 of the Corporations Act is the claim in paragraph 10 and is a claim against Concrete Supply. The evidence relevant to this claim was part of the body of evidence relevant to the Debt Claim and part of the body of evidence relevant to the DOCA Claim and I do not consider that it ought to be treated as a separate claim for costs purposes. For convenience, I will refer to this claim as the Claim for a contravention of s 286 of the Corporations Act.
The Misleading or Deceptive Conduct Claim and the Unconscionable Conduct Claim are claims made against Concrete Supply and the directors as accessories to the company’s conduct (paragraphs 11 and 12). Very little was said by ABCL at trial in relation to the Unconscionable Conduct Claim and I think that can be put to one side and it is appropriate to focus on the Misleading or Deceptive Conduct Claim (see the substantive reasons at [576]). Although it was alleged that Concrete Supply was liable as principal and the directors as accessories, the force of the case was against the directors because the primary claim against Concrete Supply was the claim in debt (see, in the context of the Breach of Trust or Fiduciary Duty Claim, the substantive reasons at [701]).
The Breach of Trust or Fiduciary Duty Claim are also claims made against Concrete Supply and the directors as accessories in that they knowingly assisted in the breach by the company (paragraphs 13 and 14). For convenience, I will refer to this claim as the Breach of Trust Claim.
I will deal with the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim together.
The DOCA Claim is the subject of paragraphs 2, 3, 4, 5, 6 and 7 of the Originating Process. ABCL had alternative routes to the destination it sought to reach, namely, the setting aside of the DOCA and an order that Concrete Supply be placed into liquidation. It was successful on those alternative routes (see the substantive reasons at [1398] and [1418]), but when it came to making final orders, I held that it was not necessary to make orders reflecting its success on each matter (see the reasons for the final orders at [25] and [26]). Plainly, that has no effect on the order for costs (Cresvale Far East at [9]) and I reject the contention of the deed administrators to the contrary (see the deed administrators’ Written Submission on Costs dated 2 December 2019 at para 7.5).
The Evidence on the Applications
In addressing the issues as to costs, I may rely on the knowledge I have obtained as the docket judge and then the trial judge in the proceeding. In addition, and as I have said, the parties tendered affidavits on the applications and it is to that evidence I now turn.
Mr Leader-Elliott addresses the following matters in his affidavit.
First, Mr Leader-Elliott said that he had reviewed the affidavit evidence filed by the parties and tendered at the trial, the parties’ written openings and closings, and the substantive reasons. He did so in order to allocate the paragraphs in those documents to the Debt Claim, the DOCA Claim, the Claim for a contravention of s 286 of the Corporations Act, the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim. He reached certain conclusions as to relevance of the paragraphs to one or more of the four claims. His principal conclusions are as follows: (1) with one exception, all the affidavit evidence filed by the parties and tendered at the trial was relevant to one or both of the Debt Claim and the DOCA Claim; and (2) all the evidence went principally to the existence of the debt, the contested contention that Concrete Supply was entitled to a discount or rebate and the conduct of the administration and deed administration, subject to three comments he makes which I do not need to set out.

Counsel for the deed administrators objected to this evidence to the extent it went beyond submissions. It seemed to me that the “evidence” could not go beyond submissions and I received it and have had regard to it on that basis.
Secondly, Mr Leader-Elliott addresses an element in the proof of ABCL’s Debt Claim which ABCL contends should have been admitted by the Concrete Supply defendants well before it was admitted by them and which led, on ABCL’s case, to the unnecessary preparation of four copies of a Supplementary Tender Book comprising 27 lever arch folders. This is said by ABCL to be relevant to its alternative claim for indemnity costs in relation to the Debt Claim. The element in the proof of ABCL’s Debt Claim was the price payable calculated in accordance with the Bulk Supply Agreement and price increase letters for product delivered to Concrete Supply by ABCL between 1 August 2009 and 6 November 2017.
Before delving into the facts any further, it is convenient to identify with more precision the way ABCL seeks to deploy this conduct by the Concrete Supply defendants. In its alternative claim for indemnity costs in relation to the Debt Claim and the DOCA Claim and, in particular, the former, ABCL contends that the Concrete Supply defendants acted unreasonably in denying, up until the eve of trial, the quantum of the debt claimed by ABCL and, separately, that the Concrete Supply defendants were not candid in their evidence and Rino and Jason (in particular) falsely and dishonestly asserted a belief that Concrete Supply was entitled to a discount or rebate.
In their submissions, the Concrete Supply defendants addressed the alleged unreasonable denial by them of the quantum of ABCL’s Debt Claim from a different perspective. They attribute to ABCL a claim based on this submission for a specific costs order in respect of the printing of the invoices to prove the quantum of the debt and submit that ABCL printed the invoices without giving prior notice to them and that ultimately, and in any event, the invoices were not tendered at trial.
ABCL made it clear in its submissions in reply that its contention is that Concrete Supply directly, and the directors by causing Concrete Supply to act as it did, acted unreasonably, and therefore, should pay indemnity costs because, inter alia, they denied until the eve of the trial the value of cement received by Concrete Supply as pleaded by ABCL despite the fact that Concrete Supply’s own records supported ABCL’s contention. Furthermore, Concrete Supply did not admit the fact of the value of the cement despite having the opportunity to do that in its Defence and in response to the Notice to Admit subsequently served by ABCL. This, it was said by ABCL, was unreasonable conduct and is certainly an answer (and this is the second thread in terms of the relevance of the issue) to the suggestion by the Concrete Supply defendants that it was unreasonable or unnecessary for ABCL to incur the cost of preparing this evidence for trial.
For reasons I will give, I have decided not to award costs to ABCL on an indemnity basis. The conduct of the Concrete Supply defendants in relation to the quantum of ABCL’s Debt Claim is not in itself sufficient to justify an award of costs on an indemnity basis. As to the cost of printing the invoices, the course taken by ABCL appears, on the face of it, to have been reasonable in light of the refusals by the Concrete Supply defendants to admit the quantum of ABCL’s Debt Claim despite what was shown in Concrete Supply’s own records.
Thirdly, Mr Leader-Elliott addresses an apparent payment of $500,000 (evidenced by Concrete Supply’s journal report for April 2018 being a financial record of Concrete Supply tendered at the trial: Court Book vol 25 tab 827 p 16273) by Concrete Supply into the trust account of the solicitors for the Concrete Supply defendants for the purpose of pre-paying those defendants’ costs of the proceeding. As I have already said, Lipman Karas wrote to the solicitors for the Concrete Supply defendants and the solicitors for the deed administrators by letter dated 28 November 2018 raising a matter against each of them. As against the Concrete Supply defendants, ABCL asserted that the payment of $500,000 involved a breach of directors’ duties and that the money which was the subject of the payment was impressed with a trust in favour of Concrete Supply. Crawford Legal responded by letter dated 30 November 2018 saying, inter alia, that the fundamental premise in the letter from Lipman Karas dated 28 November 2018 was misconceived. The letter from Crawford Legal goes on to say:
In making that deduction or drawing that inference, you have failed to consider whether the amount may have been funded by other means and whether such funding has been appropriately treated in the company’s accounts.
The Concrete Supply defendants adduced evidence on this topic. Mr D’Alessandro said that the payment of $500,000 was not paid by Concrete Supply. The payment of $500,000 to Crawford Legal was made by Mantina Investments Pty Ltd (Mantina Investments) which company had borrowed the money from Tina who, in turn, had borrowed the money from Perebo Pty Ltd under a loan agreement dated 1 March 2018. Rino and Jason guaranteed the repayment of the loan from Perebo Pty Ltd to Tina.
Mr D’Alessandro said that the financial statements of Concrete Supply and the Mantina entities were prepared on an accruals basis and not on a cash basis. The payment of anticipated legal fees, although made by Mantina Investments, was recorded by Mr D’Alessandro as an expense in the accounts of Concrete Supply. He said that in the case of accounts prepared on an accruals basis, the recording of an expense or liability does not mean that any cash has been paid out of the company.
Tina repaid the loan from Perebo Pty Ltd in March 2019. There was a further loan arrangement in relation to anticipated legal costs in March 2019, but it is not necessary for me to set out the details of that arrangement.
I accept Mr D’Alessandro’s evidence. It was not challenged by ABCL.
ABCL submits that the evidence shows that Concrete Supply funded the joint legal representation of Concrete Supply and the directors and that, absent an order that the directors indemnify Concrete Supply for its costs of the proceeding, the joint legal representation will have the practical effect of imposing on ABCL as the successful party and the other creditors of Concrete Supply: (1) the costs of the director (and deed administrators) defendants’ defence of the proceeding; and (2) Concrete Supply’s liability to meet its costs of the proceeding.
The Concrete Supply defendants responded by saying Mr D’Alessandro’s evidence showed that the deposit of $500,000 was financed by Tina borrowing from a third party, supported by a guarantee from Rino and Jason.
It seems that the effect of the evidence is that the payment of $500,000 was not a payment of cash out of the resources of Concrete Supply. However, a liability of $500,000 to Mantina Investments was recorded in the books and records of Concrete Supply. How much of that amount has actually been expended in legal costs and what, if any, amount has been expended in legal costs by the directors are matters which are not known. I take this matter into account, but, in the end, it does not play a decisive part in the reasons for the orders which I have decided should be made.
Before leaving the letter from Lipman Karas to the solicitors for the Concrete Supply defendants and the solicitors for the deed administrators dated 28 November 2018, it should be noted that Lipman Karas said to the directors that it would be seeking a costs order requiring the directors to pay ABCL’s costs personally. The passage in the letter is as follows:
Further, if our client is successful in this action we put you on notice that we will seek an order that the plaintiff’s costs be paid on an indemnity basis personally by the second defendant, the third defendant, the fourth defendant, the fifth defendant and the sixth defendant.
The fourth matter addressed by Mr Leader-Elliott is the deed administrators’ costs and remuneration. On 16 April 2019, the deed administrators circulated an Advice to Creditors in which they proposed a virtual meeting of the creditors of Concrete Supply to resolve the further interim remuneration of themselves. On 29 April 2019, Lipman Karas wrote to O’Loughlins enclosing a proxy on behalf of ABCL by which ABCL objected to the deed administrators’ remuneration being resolved without a meeting of creditors being held. By letter dated 7 May 2019, O’Loughlins advised Lipman Karas that their clients would seek Court approval for their remuneration in due course. An electronic portal maintained by the administrators contains a “time charged” report. As at 20 November 2019, that report showed that Worrells (the deed administrators’ firm) had accrued fees of $515,858.94 in the administration of Concrete Supply and legal costs and outlays in an additional amount of $550,324.39.
In his affidavit, Mr Black sought to rely on annexures to an affidavit he swore on 8 June 2018. Of particular relevance is the annexure which is the DOCA. Mr Black referred to the deed administrators’ response to the letter from Lipman Karas dated 28 November 2018. That response is dated 29 November 2018. In their response, the deed administrators assert that they have been impartial throughout the action with respect to the outcome of the claim that the DOCA be set aside and that that remained the case. They assert that whether the DOCA was to be maintained was a matter entirely for the Court. They made the following statement:
We once again confirm that our clients defend the Action firstly, for the purpose of assisting the Court by providing relevant evidence to inform the Court’s decision-making, and secondly, because your client has chosen to make serious and unsupported allegations with respect to our clients’ professional conduct in the course of the administration of the Company.
The deed administrators also contend in their letter that they will not be personally liable for the costs associated with defending the action or their remuneration, including disbursements in connection with the administration or deed administration of the company. They refer to ss 443A, 443B, 443BA and 443C of the Corporations Act in the context of their assertions that they will not be personally liable.
With respect to their right of indemnity, the deed administrators refer to the statutory right of indemnity against the assets of the company in s 443D of the Corporations Act and they assert that that right of indemnity relates not only to debts or liabilities incurred in performing or exercising any of the powers or functions in their capacity as administrators of the company, but also to their remuneration. They refer to the lien granted to them over the company’s property to secure the right of indemnity (s 443F). The deed administrators also contend that they have a contractual right of indemnity in their capacity as deed administrators and they refer to cll 15.3, 16.1, 16.2 and 16.3 of the DOCA. They assert that they also have an equitable lien over the assets in the Deed Fund to secure their right of indemnity. They then refer to their right to remuneration. They reject any suggestion that they will not be entitled to remuneration and disbursements, including legal costs. The deed administrators conclude their letter by noting that ABCL intends to seek an order that its costs be paid by the deed administrators personally on an indemnity basis if ABCL is successful in the trial of the action. The deed administrators state that for the reasons outlined in the letter, they reject any assertion that ABCL is entitled to be paid its costs of the action by the deed administrators personally.
Lipman Karas responded to this letter on 30 November 2018. In their letter, Lipman Karas asserted that it is not correct for the deed administrators to say that they had been impartial throughout the action. The letter goes on to state:
They are defendants and have defended the proceedings vigorously. They and the directors have sought to resist the claims made by our client.
In Mr Jackson’s affidavit, he identifies two settlement offers made to ABCL. First, on 12 November 2018, Crawford Legal wrote to Lipman Karas making an offer to settle the proceeding on terms which involved ABCL discontinuing its proceeding, a payment by Rino and Jason of an amount of $1 million to ABCL in settlement of the claims against them and Tina, and the DOCA remaining in place with a possible return to ABCL in relation to its Proof of Debt of 92% of a Deed Fund of approximately $5 million minus any of the administrators’ outstanding fees and expenses. The estimate of a possible return of $5 million was based on a Deed Fund of $3.9 million and a possible recovery of overpaid tax of $1.1 million. Secondly, on 29 November 2018, Crawford Legal wrote to Lipman Karas making an offer to settle all matters on the basis that ABCL would withdraw its Proof of Debt in relation to the Deed Fund and Concrete Supply would pay ABCL a total amount of $5.5 million by 31 January 2021 (or $5.25 million by 31 January 2020), such amount to be secured by equitable mortgage over extended quarry land.
The Representation of the Parties and the Result in the Proceeding
ABCL has been represented throughout the proceeding by Lipman Karas and counsel.
The Concrete Supply defendants, that is, Concrete Supply and the directors, have been represented by Crawford Legal and counsel throughout the proceeding, save and except that the liquidators have acted on behalf of Concrete Supply after the stay expired. The directors gave instructions on behalf of Concrete Supply until that point. The deed administrators were represented throughout the proceeding by O’Loughlins Lawyers and counsel. They filed a Defence in which they pleaded various matters in response to ABCL’s Debt Claim. They did not deny or admit the debt. They pleaded extensively to the allegations in relation to the DOCA Claim. They denied the allegations that their conduct fell below the standard of reasonable insolvency practitioners. They denied the allegation that Mr Cantone’s exercise of the casting vote was flawed and they denied the allegation that the DOCA should be terminated or set aside. They did not plead to the Misleading or Deceptive Conduct Claim or the Breach of Trust Claim. The deed administrators filed affidavits and gave evidence themselves and called witnesses. They were represented throughout the trial and they made extensive submissions. This is a summary of the deed administrators’ involvement in the proceeding and the substantive reasons should also be examined for an appreciation of their involvement.
The deed administrators told the Court during the trial that their defence of the proceeding was to assist the Court and because of the serious allegations made about their conduct. That is consistent with what they said in their letter dated 29 November 2018 which is set out above (at [64]).
The declarations and final orders made in this proceeding are as follows:
THE COURT DECLARES THAT:
1. The first defendant is indebted to the plaintiff in the amount of $12,457,472.22.
2.The first defendant failed to keep written financial records which complied with s 286 of the Corporations Act 2001 (Cth) between April 2009 and November 2017.
THE COURT ORDERS THAT:
3.The Deed of Company Arrangement executed on 21 December 2017 be terminated pursuant to s 445D of the Corporations Act 2001 (Cth).
4.Messrs Martin Lewis and David Kidman be appointed as joint and several liquidators of the first defendant.
5. Orders 3 and 4 be stayed until 17 December 2019.
6.The claims in paragraphs 11–14 inclusive of the Originating Process be dismissed.
In summary, ABCL succeeded in relation to the Debt Claim, the Claim for a contravention of s 286 of the Corporations Act and the DOCA Claim, and was unsuccessful in the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim.
The Submissions of the Parties
ABCL
The orders as to costs sought by ABCL are set out above (at [7]). I will not summarise ABCL’s submissions as to the relevant legal principles. I set out the relevant legal principles later in these reasons.
ABCL submits that a general order for costs in its favour against all the defendants should be made because:
(1)it has been overwhelmingly successful in the proceeding having succeeded on the Debt Claim, the Claim for a contravention of s 286 of the Corporations Act and the DOCA Claim. The key issues in the proceeding were the Debt Claim and the DOCA Claim;
(2)the matters upon which ABCL was unsuccessful were comparatively minor issues in the proceeding. They were the attribution of Ms Burgess’ knowledge to ABCL in the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim. These matters or issues were based on the same factual substratum as the matters or issues upon which ABCL succeeded. In the case of the Debt Claim, Concrete Supply’s defence of estoppel to which ABCL pleaded that Ms Burgess’ knowledge could not be attributed to it (and with respect to which ABCL succeeded) and in support of its allegation that it was misled (and which, apart from attribution, ABCL succeeded). In the case of the DOCA Claim where the terms of the Bulk Supply Agreement (upon which the Breach of Trust Claim was based) and their continued operation were issues, they were issues upon which ABCL succeeded; and
(3)the matters or issues upon which ABCL “failed” were not discrete issues, were not unmeritorious claims and do not warrant a special costs order. The Court should exercise care to avoid making orders which in form or substance have the effect of placing the burden of costs on the successful party, being, in this case, ABCL.
ABCL submits that if the Court is not prepared to make the order it seeks, then, in the alternative, an order should be made that the defendants pay its costs on an indemnity basis in relation to the Debt Claim and the DOCA Claim. The matters advanced in support of an award of indemnity costs are as follows: (1) in relation to the Concrete Supply defendants, the denial up until the eve of trial of the amount of cement delivered to Concrete Supply by ABCL and the price payable for the cement delivered under the Bulk Supply Agreement and price increase letters, and the false claims by Rino and Jason that they considered that Concrete Supply was entitled to a discount or rebate; and (2) in relation to the deed administrators, they sought to defend conduct and decisions that ought not to have been defended and opposed ABCL’s case and pressed a case that was aligned with the case of the Concrete Supply defendants.
In support of the second order it seeks, ABCL submits that it is unusual for the defence of a company in the position of Concrete Supply to be conducted by its directors, rather than the deed administrators. That may be accepted (Sydney Land Corporation Pty Ltd v Kalon Pty Ltd (1997) 142 FLR 188 (at 189–190 per Santow J); Cresvale Far East (at [77] per Austin J)). As I have said, the directors gave instructions to Crawford Legal and counsel on behalf of Concrete Supply.
ABCL submits that whilst Concrete Supply and the directors filed separate defences, that was the highwater mark of the separation between the two. The real parties to the proceeding were ABCL on the one hand, and the directors and the deed administrators on the other. If Concrete Supply is liable for the costs of defending the proceeding (as appears likely having regard to the Journal Report) and is liable to pay ABCL’s costs, the liability of Concrete Supply is effectively borne by ABCL and other creditors of Concrete Supply. The directors were the real parties to the litigation.

With respect to the third order it seeks, ABCL submits that the usual order is that the deed administrators as the unsuccessful party should be ordered to pay the successful party’s costs (i.e., ABCL’s costs) and it is a further and separate question as to whether those costs should be limited to the assets of the company. ABCL submits that the costs order should not limited to the assets of Concrete Supply. In summary, ABCL makes two submissions. First, Concrete Supply, through the directors, was defending the DOCA and there was no need for the deed administrators to do that on behalf of the company. Secondly, insofar as they were defending the serious allegations made against them by ABCL, that was not a legitimate reason for them to proceed in the way in which they did. Further, and in any event, even if the deed administrators subjectively believed their conduct was justified, no reasonable person standing in their shoes could take that view. In support of that proposition, ABCL referred to a number of deficiencies in their investigations and Second Report to Creditors as outlined in the substantive reasons.
In the result, so ABCL contends, the deed administrators’ liability for costs and their own costs were not properly incurred and are not within the deed administrators’ right of indemnity.
As I have said, I invited the parties to make further submissions on the appropriate division in percentage terms of the costs of the issues relating to the DOCA on the one hand (the DOCA issues), and all other issues in the case on the other (the non DOCA issues) and, as to the non DOCA issues, an appropriate division in percentage terms of the costs of the issues relating to the Misleading or Deceptive Conduct Claim and Unconscionable Conduct Claim and the Breach of Trust Claim on the one hand, and all other non DOCA claims on the other.
A summary of ABCL’s submissions in response to that invitation is as follows. The conclusion of those submissions is that ABCL contends that 90% or more of the time and costs associated with the proceeding was in relation to the DOCA issues. The only non DOCA issues were the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim and less than 10% of the time and costs of the proceeding were associated with those claims. ABCL put two submissions in support of that conclusion. The first submission is that the Debt Claim (and the Claim for a contravention of s 286 of the Corporations Act) was an inseparable part of the DOCA issues. It was a matter to be investigated by the deed administrators, had a bearing on the accuracy of the company’s books and records and on its solvency and on whether there were claims against the directors and claims to recover unpaid tax. All of these issues surrounding the Debt Claim would, according to ABCL, have been part of the case even if the only claim for relief made by ABCL had been for an order that the DOCA be set aside. The second submission involved ABCL identifying matters, such as the length of affidavits, the time taken giving evidence and the topics of evidence, to support its submission that over 90% of the time and costs in the proceeding were directed to the DOCA issues.
The Deed Administrators
The orders sought by the deed administrators are set out above (at [9]). Again, I will not summarise the deed administrators’ submissions as to the relevant legal principles, particularly those relating to the circumstances in which, in relation to particular liabilities, persons in the same position as the deed administrators have been held not to be entitled to a right of indemnity. I set out the relevant legal principles later in these reasons.
The principal submissions made by the deed administrators are as follows:
(1)The deed administrators’ involvement in the proceeding as summarised above (at [70]) was for two reasons. First, they were “required” to defend the proceeding because of the “serious and unsupported allegations that the Plaintiff levelled against them”. Secondly, they were fulfilling their role of assisting the Court in its decision as to whether the DOCA should be set aside, “particularly by reference to the question of whether the DOCA would provide a better return to creditors”. This articulation of the reasons the deed administrators played the part they did in the proceeding is consistent with what they said in their letter to Lipman Karas dated 29 November 2018 (see [64] above) and their statement to the Court during the trial (at [71]).
Despite the emphasis placed on these two reasons, the deed administrators also pointed out that they were only sued in their representative capacity and not in their personal capacity and that it was “self-evidently reasonable” for them to participate in a proceeding brought against Concrete Supply.
(2)As far as the serious and unsupported allegations that ABCL levelled against them, there were no findings of negligence, professional misconduct or impropriety made against them and nor have they been removed on grounds of corruption, maladministration or other similar conduct regarded as sufficiently odious or to have involved such impropriety as to justify an order that they pay costs.
(3)As far as assisting the Court is concerned, that includes putting before the Court material which the Court needs to decide the issues before it. The deed administrators did not seek an ongoing role in Concrete Supply and, although they continued to hold the view that the DOCA would provide a better return to creditors, they accepted that “the ultimate determination in that regard was for the Court”.
(4)The deed administrators have a right of indemnity by reason of s 443D of the Corporations Act and the DOCA, cll 15.3, 16.1, 16.2 and 16.3. Although the right of indemnity which arises under the general law was not specifically mentioned in the Written Submission on Costs dated 2 December 2019, the deed administrators did not abandon reliance on it.
(5)A majority of the hearing time at trial was occupied by the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim. That cannot be right on any view of the facts and I think the deed administrators later clarified their submission (see [84] below).
(6)In response to the orders sought by the Concrete Supply defendants as set out above (at [12]), the deed administrators contend:
(a)there is no pleaded or procedural foundation for the orders sought;
(b)for the reasons given in their response to ABCL’s submissions, they should not be deprived of their right of indemnity;
(c)the orders sought by the Concrete Supply defendants in relation to the deed administrators, or at least the second order, reflect what is in reality a claim for damages which has been neither pleaded nor proved, rather than an order for costs;
(d)if a costs order is made against the deed administrators and limited to the one issue in which it was joined, i.e., the DOCA Claim, then the deed administrators accept that such costs order would be made on a joint and several basis with the Concrete Supply defendants. However, there is no warrant for a 75%/25% apportionment in favour of the Concrete Supply defendants against the deed administrators; and
(e)the deed administrators did not participate in the issues which occupied the bulk of the time involved with the hearing of evidence at the trial. The Debt Claim, the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim occupied, according to the deed administrators, 12 of the 18 days approximately involved in the hearing of evidence.
As far as an appropriate division in percentage terms of the costs of the DOCA issues on the one hand, and the costs of the non DOCA issues on the other and, with respect to the non DOCA issues, an appropriate division in percentage terms of the costs of the issues relating to the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim on the one hand, and all other non DOCA claims on the other, the principal submissions made by the deed administrators are as follows:
(1)30% of the costs of the proceeding are attributable to the DOCA issues and 70% are attributable to the non DOCA issues. This is supported by the calculation made by the deed administrators that approximately six out of the 18 days over which evidence was heard related to the DOCA issues;
(2)of the costs attributable to the DOCA issues, 75% should be paid by the Concrete Supply defendants and 25% by the deed administrators. An important issue in the DOCA issues — the adequacy of the books and records in terms of s 286 of the Corporations Act — was the sole responsibility of the directors; and
(3)the deed administrators should not be ordered to pay any costs in relation to the non DOCA issues because they were not involved in those issues.
The Concrete Supply Defendants
The orders sought by the Concrete Supply defendants are set out above (at [12]). Again, I will not summarise the submissions of the Concrete Supply defendants as to the relevant legal principles. The relevant legal principles are set out later in these reasons.
The principal submissions made by the Concrete Supply defendants are as follows:
(1)There is no basis in this case for an award of indemnity costs in relation to the Debt Claim, the DOCA Claim and the Claim for a contravention of s 286 of the Corporations Act because of the following: (a) indemnity costs, when awarded, are usually awarded by reason of conduct in the litigation, not conduct prior to the litigation, such as the taking of the discount or rebate by Concrete Supply based allegedly on the belief of Rino and Jason; (b) there was nothing unreasonable about Concrete Supply’s defence of the litigation and, in particular, its case seeking to uphold the DOCA supported as it was by a number of factors, including the opinion of an independent expert and in circumstances where there were acknowledged and substantial irregularities in ABCL’s own customer account ledgers; and (c) ABCL’s act of printing the invoices for the purpose of proving the quantum of the debt it claimed was done without notice to the Concrete Supply defendants and, as it happened, the invoices were not tendered at the trial.
(2)With respect to the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim, costs should follow the event and ABCL should be ordered to pay the directors’ costs of those claims in light of, or particularly in light of, the following: (a) Tina was wholly successful; (b) the 2009 Misrepresentation Case was statute-barred; (c) ABCL, through Ms Burgess’ knowledge, was held to be aware of the true level of indebtedness of Concrete Supply; (d) the directors made offers to settle the claims against the directors on terms that were more favourable to ABCL than the result it achieved in the litigation.
(3)Whilst there might be some overlap in the factual basis of ABCL’s claims against Concrete Supply and ABCL’s claims against the directors, they were separate claims against separate parties and the claims against the directors raised factual matters not raised in the claims against Concrete Supply, including the payment terms and just-in-time delivery practices, Tina’s involvement in the business of Concrete Supply, the circumstances surrounding the execution of the audit confirmation letter, a number of matters put to Mr Hughes and Mr Lemmon in their respective cross-examinations and the retention of title clause in the Bulk Supply Agreement. Furthermore, the estoppel defence raised by Concrete Supply to the Debt Claim failed on a different element from the element which led to the failure of the Misleading or Deceptive Conduct Claim.
(4)With respect to the claim that the directors should indemnify Concrete Supply in relation to the costs it is ordered to pay to ABCL, an order of this nature is the same or similar to an order that non-party directors pay the company’s costs or the costs it is ordered to pay. Such an order is only made in exceptional circumstances, such as impropriety or bad faith or circumstances in which the directors are the real parties. Such circumstances do not exist in this case. Concrete Supply was a proper party to the proceeding and the important order setting aside the DOCA was the result primarily of failures by the deed administrators in the course of the administration. No finding was made that the DOCA was entered into in bad faith or for an improper purpose. In responding to the DOCA Claim, Concrete Supply was “representing multiple interests, including those of creditors, directors and employees”. Finally, the Concrete Supply defendants submit that it is significant that ABCL did not put the directors on notice of the orders which it now seeks.
(5)With respect to the order that the deed administrators not be indemnified in relation to any costs order made against them and their argument for an apportionment or contribution of 75%/25% against the deed administrators, the Concrete Supply defendants largely rely on the findings of the deed administrators’ failures during the administration. As to their apportionment or contribution argument, it is of note that one of the submissions made by the Concrete Supply defendants is as follows:
In contrast, the company (through its directors) was in the position of a consumer seeking the assistance of a professional insolvency practitioner. The company (through its directors) was not in a position to know what investigations the Administrators ought to have carried out or to influence the exercise of the casting vote.
As far as the appropriate division in percentage terms of the costs of the DOCA issues on the one hand, and the costs of the non DOCA on the other, and with respect to the non DOCA issues, an appropriate division in percentage terms of the costs of the issues relating to the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim on the other hand, and all other non DOCA claims on the other, the key submissions made by the directors are as follows:
(1)ABCL’s claims against the directors were unsuccessful. Those costs were not necessary to the success of the Debt Claim or the DOCA Claim.
(2)The components of the proceeding and the appropriate allocation of the costs of the proceeding are as follows: (a) Debt Claim: 15%; (b) DOCA Claim: 45%; (c) Claim for a contravention of s 286 of the Corporations Act: 0%; and (d) Misleading or Deceptive Conduct Claim and Breach of Trust Claim: 40%.
(3)In terms of time taken and the importance of the issues, those matters evolved from the time of the preparation of evidence to the trial and the latter is a more reliable guide to the appropriate division in percentage terms of costs than the former.
(4)The directors support their argument that only 15% of the costs should be allocated to the Debt Claim by reference to matters such as the extent to which the substantive reasons addressed the issue, the amount of evidence of the key witnesses devoted to the issue (i.e., Rino, Jason, Mr D’Alessandro, Ms Senanayake and Ms Booth) and the extent to which Mr Morris’ evidence was relevant to the issue.
(5)With respect to the DOCA Claim, the existence of the debt was not a direct criterion for the DOCA’s termination and “in significant respects” it was material deficiencies in the investigations carried out by the deed administrators that led to the DOCA being set aside. The directors sought to support their allocation of 45% of the costs to the DOCA Claim by reference to various asserted proportions of a witness’ evidence.
(6)With respect to the Misleading or Deceptive Conduct Claim and Breach of Trust Claim, the directors submit the following: (a) there was no overlap between these issues on the one hand, and the DOCA Claim and the Claim for a contravention of s 286 of the Corporations Act on the other; (b) there was a perceived overlap between the Debt Claim and the Misleading or Deceptive Conduct Claim, but it was minimal and related to a contested assessment of damages which was, in any event, not reached because the Misleading or Deceptive Conduct Claim failed at the first hurdle. The directors make a specific point in relation to Mr Lemmon’s evidence which extended over two days, and that was that it was directed to avoiding the attribution of Ms Burgess’ knowledge to ABCL, a contention by ABCL which was ultimately unsuccessful.
The Relevant Legal Principles
In this section, I will identify the relevant legal principles with respect to the issues raised by the submissions made by the parties.
The first issue is the Court’s approach to costs in a case where a party succeeds, but not on all issues raised in the proceeding and the question is whether the Court should reflect that lack of success on particular issues in its order for costs. ABCL submits that this issue is raised. By contrast, the Concrete Supply defendants submit that this issue does not arise and that the position is that ABCL’s claims against Concrete Supply succeeded and ABCL should have its costs of those claims against the company, whereas ABCL’s claims against the directors failed and the directors should have their costs of those claims against ABCL. For reasons which I will give, I consider that it is appropriate to treat Concrete Supply and the directors as, in effect, one party and therefore the first issue (as I have described it) does arise.
The decision of the Full Court of this Court in Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 contains a summary of the relevant principles with respect to the first issue. The Full Court said (at [297], [298], [301] and [303]):
297There are two general approaches to the award of costs that have general application and have been the subject of numerous decisions:
(1)The successful party is generally entitled to its costs. That is, costs usually follow the event.
(2)It is also the case that a successful party may be awarded less than its costs, or there may be an order apportioning costs, on the basis of success on the issues.
298This has been recently reiterated by the High Court (per French CJ, Kiefel, Nettle and Gordon JJ) in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270 at [6], where their Honours observed that if the event of success cannot be seen as contestable, having regard to how separate issues have been determined, then:
‘There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like.’
301On the other hand, Courts have been increasingly concerned, generally, to use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. This has led to decisions whereby the successful party does not recover all of its costs where it has been unsuccessful on a discrete issue or in what is decided to be an unmeritorious objection. While it is acknowledged that, ordinarily, costs follow the event, the wide discretion in awarding costs has led to circumstances where a successful party who has failed on certain issues may be ordered to pay the other party’s costs of them (as discussed in Hughes v Western Cricket Association (Inc) [1986] ATPR 40-748 per Toohey J), although warnings have been stated that care should be taken in such a course and consideration be given to whether the issues on which the successful party failed are clearly dominant or separable (Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330-331 per Mahoney JA) and to whether the issues involved different factual enquiries in the one proceeding or multiple causes of action, even if based on a common substratum of fact.
303… However, the Courts have been slow to order a successful party to pay the costs where it has been unsuccessful on some issues. In Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1993) 47 FCR 81, Keely J was of the view (at 84) that, without attempting to fetter the discretion, this power ought to be exercised only where the Court, on a consideration of all of the circumstances, has concluded that the raising of an issue by the applicant on which it has failed was so unreasonable that it is fair and just to make the order.

I have reached the conclusion that an appropriate allocation for the costs associated with the Debt Claim and the DOCA Claim is, in the case of ABCL, 75% of its costs of the proceeding. Although it is appropriate to reduce the costs recovered by ABCL to reflect its lack of success with respect to the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim, I do not consider that this is an appropriate case to award costs on those issues to the directors or, as I put it earlier, notionally recognise the unsuccessful party’s entitlement to costs by the size of the reduction in the successful party’s costs. I take that view for two reasons.
First, I do not consider that ABCL acted unreasonably or improperly in raising the claims of misleading or deceptive conduct or breach of trust as far as they were made against Concrete Supply. Those claims were, in a sense, the other side of the coin from the Debt Claim. The state of mind of the directors and, in particular, Rino and Jason, was critical to the claim in estoppel and, in those circumstances, it was not unreasonable or improper for ABCL to allege that the directors were accessories in respect of the alternative claims.
Secondly, and I refer to this matter as something of a counterbalance to any suggestion that the order causes injustice to the directors, I consider that there is otherwise a strong argument that the Concrete Supply defendants should pay the costs of the Debt Claim on an indemnity basis. Not only is that so because of the fact that the alleged discount or rebate on its face had a number of unusual, if not very unusual, features (see the substantive reasons at [1279]), but more importantly, the argument depended on the directors establishing that they had a genuine belief about the existence of the discount or rebate and their evidence on that topic was not accepted.
The director defendants submit that the offer of settlement they made is a reason they should be awarded their costs of ABCL’s unsuccessful claims for misleading or deceptive conduct and breach of trust. That offer of settlement is described earlier in these reasons (at [68]). I reject that submission because the offer to settle the Misleading or Deceptive Conduct Claim and Breach of Trust Claim was not a “stand alone” offer capable of acceptance without accepting all the terms of settlement which included the settlement of claims in relation to which ABCL succeeded. The same point is made with respect to the second offer of settlement insofar as the directors rely on that offer, with the additional point that that offer appears to have been made by Concrete Supply.
Proposed Order 2
There is no doubt that the Court has the power to apportion costs between defendants or order a contribution between defendants in relation to costs. That is clearly the position under the general law and is made clear by s 43(3)(c) of the Federal Court of Australia Act.
Proposed Order 1 creates a joint and several liability between the defendants referred to in the order. That means that ABCL can, if it chooses, recover all of its costs from one or more of the directors. However, absent an indemnity of the type sought by ABCL, the directors may be in a position to claim a contribution from Concrete Supply with respect to the costs paid by them. Such a claim, would be a claim in the liquidation of Concrete Supply as would the claim for Concrete Supply’s costs, or in the alternative, if those costs have already been paid, the assets of Concrete Supply had been diminished to that extent.
At the time Concrete Supply went into administration, the parties with an interest in Concrete Supply’s assets were its creditors. ABCL was owed over 90% of the total debt of the company. Any increase in those liabilities will diminish the dividend paid to ABCL in relation to its Debt Claim.
In my opinion, had the directors conceded the Debt Claim, as on my findings they should have done, the claim would not have been litigated. Furthermore, the DOCA Claim may well not have been litigated either. That is certainly the case had the directors acknowledged the debt to ABCL as and when the debt arose. Had they done so when ABCL served its letter of demand in October 2017 (the substantive reasons at [738]), matters thereafter may well have proceeded in quite a different way. The debt owed by Concrete Supply to ABCL would not have been assumed, but would have been admitted by the directors with all the differences that might have led to in terms of the conduct of the administrators, and indeed, by the directors themselves.
In my opinion, Proposed Order 2 should be made.
Proposed Order 3
ABCL presented with some force an argument to the effect that most of the time and cost of the proceeding should be allocated to the DOCA Claim. However, I reject the argument because I consider that the claims were sufficiently distinct, at least from the point of view of the costs of ABCL which the second and third defendants should be ordered to pay. Based on my earlier analysis, I am of the opinion that the allocation of 75% should be apportioned 35% to the Debt Claim and 40% to the DOCA Claim.
The deed administrators must pay 40% of ABCL’s costs of the proceeding. ABCL made a submission that the approach of the deed administrators to the litigation warranted an award of indemnity costs against them. It submits that the deed administrators were wholly unsuccessful in their defence of themselves and of the DOCA and that the serious deficiencies in their investigation meant that their defence of the DOCA Claim was doomed to failure from the outset and that ABCL and Concrete Supply were put to an unnecessary cost as a consequence. A problem with this last point is that whatever the deed administrators did, the Concrete Supply defendants were defending the DOCA Claim. ABCL also submits that the professed purpose of the deed administrators of assisting the Court was undermined by “their failure to be candid in their evidence”. The problem with this submission is that it is not correct in relation to Mr Cooper’s evidence and, although there were a number of unsatisfactory features of Mr Cantone’s evidence, they do not rise to the level of justifying an award of indemnity costs.
I will address the submission made by the deed administrators that their liability under the order should be limited to the assets of Concrete Supply when I come to deal with their right of indemnity.
The Concrete Supply defendants submit that the costs both they and the deed administrators are ordered to pay should be apportioned on a 25%/75% basis in their favour because the costs of the unsuccessful defence to the DOCA Claim was caused by the many failures of the deed administrators. I reject this argument for two reasons. First, the conduct of the deed administrators relied on by the Concrete Supply defendants for the purposes of this submission does not directly relate to the proceeding. Ordinarily, the conduct relevant to the apportionment of costs between defendants will be conduct in the proceeding and not conduct prior to the proceeding, and the subject of the proceeding. Secondly, it may be possible to apportion costs between defendants on the basis of the respective contributions to the conduct giving rise to the proceeding where the respective contributions is an actual issue in the case and is the subject of the Court’s decision or a transparent settlement. Although the submission by the Concrete Supply defendants outlined above (at [86](5)) seems to be directed to respective contributions in this sense, the fact is that the respective contributions was not an actual issue in the case and was not the subject of the Court’s decision.
At the same time, I see no reason to apportion costs in relation to the DOCA Claim on a 25%/75% basis in favour of the deed administrators. It seems to me that, as far as the DOCA Claim is concerned, there is no reason to distinguish between the deed administrators and the Concrete Supply defendants.
Proposed Order 4
Proposed Order 4 involves a rejection of the two orders sought by the deed administrators.
An administrator of a company has a right of indemnity under the general law and under s 443D of the Corporations Act. Section 443D is in the following terms:
443D Right of indemnity
The administrator of a company under administration is entitled to be indemnified out of the company’s property (other than any PPSA retention of title property subject to a PPSA security interest that is perfected within the meaning of the Personal Property Securities Act 2009) for:
(a)debts for which the administrator is liable under Subdivision A or a remittance provision as defined in subsection 443BA(2); and
(aa)any other debts or liabilities incurred, or damages or losses sustained, in good faith and without negligence, by the administrator in the performance or exercise, or purported performance or exercise, of any of his or her functions or powers as administrator; and
(b)the remuneration to which he or she is entitled under Division 60 of Schedule 2 (external administrator’s remuneration).
The debts covered by the administrator’s right of indemnity are given a certain priority in the winding up of a company (see ss 443E and 556(1)(c)).
A deed administrator generally has a right of indemnity under the deed of company arrangement appointing him or her to the position, and may also have a right of indemnity under the general law. The debts covered by the right of indemnity are given a certain priority in the winding up of a company (s 556(1)(dd) of the Corporations Act). The termination of a deed of company arrangement does not affect “the previous operation of the deed” (s 445H). A deed administrator does not have a right of indemnity under s 443D. That section does not in its terms (“the administrator of a company under administration …”) apply to a deed administrator under a deed of company arrangement. This was the view of Austin J in Cresvale Far East (at [67]) and is a view with which I respectfully agree. It was not altered by anything said by the Court on the appeal (Kirwan v Cresvale Far East).
The clauses in the DOCA which were relied by the deed administrators were cll 15.3, 16.1, 16.2 and 16.3.
Clause 15.3 is in the following terms:
15.3 Deed Administrators Not Personally Liable
Subject to any relevant provisions of the Act in the performance or exercise of the Deed Administrators’ powers, obligations, functions and duties under this Deed, the Deed Administrators will not be personally liable for:
(a)any debts, liabilities, obligations or claims of any kind whatsoever incurred by or on behalf of the Company whether before, during or after the period of the operation of this Deed; or
(b)any loss or damage of any kind whatsoever excluding loss or damage arising from fraud or gross negligence default or omission of the Deed Administrators or any person or body corporate or incorporate acting on their behalf in exercising their powers, obligations functions or duties under this Deed.
This clause does not assist the deed administrators in terms of a costs order made against them or their own costs. Those costs are not debts, liabilities, obligations or claims “incurred by or on behalf of the Company” within cl 15.3(a). The deed administrators were not acting on behalf of the company. As I have said, the directors were giving instructions to Crawford Legal on behalf of the company. Nor, in my opinion, do the costs I have identified amount to “loss or damage” within cl 15.3(b) of the DOCA when that paragraph is read in the context in which it appears.
Clause 16.1 is in the following terms:
16.1 Calculation of Remuneration
The Deed Administrators will be remunerated by the Company, and will be entitled to draw from the Deed Fund for their work as Deed Administrators. The Deed Administrators will be entitled to employ staff to assist them in the performance or exercise of their duties, obligations, responsibilities and powers under this Deed and the remuneration of the Deed Administrators, their employees and staff will be calculated in accordance with the rates of charge issued from time to time by the Deed Administrators plus GST payable thereon, determined according to and as required by law
This clause relates to the remuneration and calculation thereof of the deed administrators and that is not relevant to the issues under consideration.
Clause 16.2 is in the following terms:
16.2 Indemnities
(a) Nature of Indemnities
The Company covenants with the Administrators and Deed Administrators that they are indemnified and will be kept indemnified from Property and the Deed Fund in respect of the following:
(1)Administrators’ Remuneration;
(2)Administrators’ Disbursements;
(3)Administrators’ Liabilities;
(4)Deed Administrators’ Remuneration;
(5)Deed Administrators’ Disbursements;
(6)Deed Administrators’ Liabilities.
The Deed Fund is defined in cl 8 and “Property” is defined in cl 1.1 as follows:
Property means any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description of the Company and includes a thing in action;
The relevant matters in cl 16.2(a) for present purposes are “Deed Administrators’ Disbursements” and “Deed Administrators’ Liabilities”. Those terms are defined in cl 1.1 of the DOCA in the following way:
Deed Administrators’ Disbursements means all incidental costs and disbursements incurred by the Deed Administrators from the Commencement Date to the Termination Date in connection with the implementation of this Deed and the performance of the Deed Administrators’ duties including, but not limited to, all legal costs incurred by the Deed Administrators plus any GST payable thereon;
Deed Administrators’ Liabilities means:
(a)any debt or other obligation incurred by the Company for which the Deed Administrators are liable and which were incurred during the period from the Commencement Date to the Termination Date;
(b)any debts or other obligations incurred by the Deed Administrators during the period from the Commencement Date to the Termination Date;
(c)all actions, suits, proceedings, accounts, claims and demands arising after the Commencement Date, out of or relating to this Deed which may be commenced, incurred by or made on the Deed Administrators (in any capacity), by any person and against all costs, charges and expenses incurred by the Deed Administrators; and
(d)any amount in respect of which the Deed Administrators are entitled to the benefit of the indemnity in clause 16.2 of this Deed;
I should mention two other features of the DOCA. Under cl 7, the company is returned to the control of the directors upon the execution of the Deed by all parties, and under cl 8, the deed administrators hold the Deed Fund defined in that clause on trust for their benefit and for creditors in accordance with terms of the Deed.
Schedule 8A to the Corporations Regulations 2001 (Cth) provides for prescribed provisions in the case of a deed of company arrangement and reg 5.3A.06 provides that for subs 444A(5) of the Act, the prescribed provisions are those set out in Sch 8A. Section 444A(5) provides that the deed of company arrangement is taken to include the prescribed provisions accept so far as it provides otherwise. The DOCA provides in cl 5.1 as follows:
5.1 Regulations
Each of the prescribed provisions contained in Schedule 8A of the Regulations is included in this Deed, save to the extent that they are expressly excluded in this Deed. If any provision in this Deed contradicts any provision in Schedule 8A, then this Deed will prevail.
The prescribed provisions in Sch 8A include a provision to the effect that in exercising the powers conferred by this deed and carrying out the duties arising under this deed, the administrators are taken to act as agent for and on behalf of the company. This means that the deed administrator owes fiduciary obligations to the company. In Cresvale Far East, Austin J set out provisions of the deed of company arrangement in issue in that case (at [75]) and then said (at [76]):
While those provisions do not, in terms, incorporate the limitation that the right of reimbursement is available only where the administrator acts properly and reasonably (in other words, the limitation explained in Adsett v Berlouis), it seems to me that such a limitation must be implied, because of the fiduciary nature of the administrator’s office. As an agent and a fiduciary, an administrator must exercise his or her powers subject to equitable limitations. Nothing in the DCA purports to exclude such a limitation.
In my respectful opinion, his Honour is correct and the fiduciary nature of the deed administrators’ position means that the same limitation on their right of indemnity under the general law applies to their right of indemnity under the DOCA.
The deed administrators were not acting on behalf of Concrete Supply in the proceeding. Concrete Supply was represented by Crawford Legal and was seeking to uphold the DOCA and resist an order that the DOCA be set aside. The deed administrators asserted in their letter dated 29 November 2018 that they had been impartial throughout the action with respect to the outcome of the relief whereby ABCL sought to set aside the DOCA. In submissions, the deed administrators said that they had been impartial and left it up to the Court to determine whether the DOCA should be set aside.
It is convenient to repeat again what the deed administrators said in their letter dated 29 November 2018. It was as follows:
We once again confirm that our clients defend the Action firstly, for the purpose of assisting the Court by providing relevant evidence to inform the Court’s decision-making, and secondly, because your client has chosen to make serious and unsupported allegations with respect to our clients’ professional conduct in the course of the administration of the Company.
Dealing with the first purpose of assisting the Court by providing relevant evidence to inform the Court’s decision-making, I have already referred to the remarks of Young CJ in Eq in Kirwan v Cresvale Far East (at [115]). It may be accepted that deed administrators have a duty to assist the Court and that may involve putting information before the Court and incurring costs in doing so. Those costs reasonably and properly incurred may be recovered by the deed administrators under their right of indemnity. Critically, what is reasonable assistance depends on the circumstances of the case. If in doubt as to what is reasonable assistance in any particular case, the deed administrators may make a formal application under s 90-15(3)(a) of Sch 2 of the Corporations Act for directions. In this case, the deed administrators went well beyond what could be considered reasonable assistance on any view. They were not representing Concrete Supply and yet they fully participated in the trial in the manner I have previously outlined (at [70]). Concrete Supply was represented and was presenting a defence, which included expert evidence, seeking to maintain the DOCA. At no point during the proceeding were the deed administrators putting a position on behalf of Concrete Supply. That was done by Crawford Legal and the counsel they instructed. Whatever was reasonable assistance in this case, it was a great deal less than the deed administrators’ actual involvement. I say “whatever was reasonable assistance in this case” because the deed administrators did not put an alternative claim in terms of their liabilities in relation to, or their costs of, the proceeding. They must be taken to have chosen not to do so. I should add that an alternative claim would not involve an exercise of starting with the existing claim and then removing certain items, but rather, a completely new and different counterfactual.

The other purpose advanced by the deed administrators for their involvement in the proceeding, namely, to defend serious and unsupported allegations with respect to their conduct in the course of the administration is not a proper purpose. It is true that it is not a disqualifying factor if it is merely an incident of an exercise of a power for a proper purpose (Walters v Woodbridge at 509 per Jessel MR). However, in this case, there is no proper purpose to which it was an incident.
For the purposes of their right of indemnity, the deed administrators cannot rely on the purpose of defending serious and unsupported allegations with respect to their professional conduct in the course of the administration. I should say that even if that was a proper purpose, ABCL has another argument which has considerable force, but which I do not need to decide, that the failures on the part of the deed administrators in their investigations and in their preparation of the Second Report to Creditors outlined in summary form below are so substantial that no reasonable person in the shoes of the deed administrators would have expended funds in defending the allegations. In saying this, I acknowledge that I did not find that Mr Cantone was acting at the behest of the directors (the substantive reasons at [1368]), however, it would seem to me to be appropriate to look at the allegations in the round and many of them were allegations which I upheld.
My findings in the substantive reasons concerning the inadequacies in the deed administrators’ investigations and the deficiencies in the Second Report to Creditors may be summarised as follows:
(1)a failure to investigate Concrete Supply’s debt to ABCL and the impact of the debt on Concrete Supply’s accounts and on its solvency ([1244]–[1249] and [1278]–[1289]);
(2)a failure to investigate the assets of the directors (at [1317]–[1320]);
(3)a failure to investigate invoices from Mantina Earthmovers and a dramatic fall in the debt owed by Mantina Earthmovers in the period shortly before the administration and a failure to assess properly the recoverability of the debt (at [1334]–[1340]);
(4)incorrectly stated in the Second Report to Creditors that Concrete Supply’s books and records complied with s 286 of the Corporations Act when they did not (at [1374]);
(5)a failure to explain in the Second Report to Creditors any possibility of an earlier date of insolvency, and the consequences for insolvent trading and other potential claims against the directors (at [1374]);
(6)incorrectly stated in the Second Report to Creditors that the deed administrators were currently seeking legal advice from counsel (at [1376]);
(7)a failure to qualify the opinion about the recoverability of the Mantina Earthmovers debt in the Second Report to Creditors (at [1375]);
(8)the flaws in Mr Cantone’s exercise of his casting vote (at [1412]); and
(9)other failures in the administration (at [1358]–[1362]).
Conclusion
I refer to the proposed orders set out in these reasons (at [119]). I will give the parties an opportunity address the form of the orders, if they are so advised.

I certify that the preceding one hundred and seventy (170) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.
Associate:
Dated: 6 July 2020

SCHEDULE OF PARTIES

SAD 12 of 2018

Defendants

Fourth Defendant:

PELEGRINO OBBIETTIVO

Fifth Defendant:

GENESIO OBBIETTIVO

Sixth Defendant:

TINA OBBIETTIVO

File number:	SAD 12 of 2018
Judge:	BESANKO J
Date of judgment:	6 July 2020
Catchwords:	COSTS — where the proceeding concerned a number of claims made by the plaintiff, namely a claim in debt as against the first defendant, a claim that the first, fourth, fifth and sixth defendants engaged in misleading or deceptive conduct, a claim that the first, fourth, fifth and sixth defendants committed a breach of trust or fiduciary duty, a claim that the first defendant contravened s 286 of the Corporations Act 2001 (Cth), and a claim that the deed of company arrangement to which the first defendant was subject be terminated or set aside on various bases — where the plaintiff succeeded on the Debt Claim, the Claim for a contravention of s 286 and the DOCA Claim, but not on the Misleading or Deceptive Conduct Claim and the Breach of Trust Claim COSTS — where the plaintiff seeks an order that the defendants pay its costs of the proceeding — whether the various claims are sufficiently distinct — consideration of the appropriate apportionment of costs — where the plaintiff seeks an order in the alternative that it be awarded its costs of the Debt Claim and the DOCA Claim on an indemnity basis COSTS — where the plaintiff also seeks an order that the fourth to sixth defendants pay the first defendant’s costs of and incidental to the proceeding, including its liability to pay costs to the plaintiff — whether it is appropriate to treat the first defendant and the fourth to sixth defendants as, in effect, one party COSTS — whether the second and third defendants should be deprived of their right of indemnity out of the assets of the first defendant in respect of their liability for the plaintiff’s costs and in respect of their own costs — whether the orders sought by the plaintiff in relation to the second and third defendants’ right of indemnity are “costs orders” and ought to have been pleaded — where the first defendant was represented by the fourth to sixth defendants and not the second and third defendants — where the second and third defendants participated in the proceeding for the asserted purposes of assisting the Court and defending allegations made by the plaintiff against them — whether such purposes engage the right of indemnity
Legislation:	Corporations Act 2001 (Cth) ss 286, 443A, 443B, 443BA, 443C, 443D, 443E, 443F, 444A, 445D, 445H, 556, 600K Federal Court of Australia Act 1976 (Cth) s 43 Corporations Regulations (2001) (Cth) Sch 8A, reg 5.3A.05 Federal Court (Corporations) Rules 2000 (Cth) r 2.8(3) Insolvency Practice Schedule (Corporations) 2016 (Sch 2 to the Corporations Act 2001 (Cth)) ss 5-15, 5-20, 90-15, 90-20
Cases cited:	Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) [2018] FCA 315 Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2018] FCA 1003 Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 3) [2018] FCA 1058 Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 4) [2019] FCA 1846 Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 5) [2019] FCA 1914 Adsett v Berlouis (1992) 37 FCR 201 Cadwallader v Bajco Pty Ltd [2002] NSWCA 328 Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 Cresvale Far East v Cresvale Securities (No 2) [2001] NSWSC 791; (2001) 39 ACSR 622 Deputy Commissioner of Taxation v BE100 Property Investments Pty Ltd [2016] FCA 597 Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807 In re Elgindata Ltd (No 2) (1992) 1 WLR 1207 Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21 Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 Mannigel v Aitken (1983) 77 FLR 406 Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1993) 47 FCR 81 Morad v El-Ashey (No 2) [2017] FCA 1612 Naomi Marble and Granite Pty Ltd v FAI General Insurance Co Ltd (No 2) (1999) 1 Qd R 518 Probiotec Ltd v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30 Re Beddoe; Downes v Cottam [1893] 1 Ch 547 Re Talk Finance and Insurance Services Pty Ltd (1994) 1 Qd R 558 Sydney Land Corporation Pty Ltd v Kalon Pty Ltd (1997) 142 FLR 188 Total Spares & Supplies Limited v Antares SRL [2006] EWHC 1537 (Ch) Walters v Woodbridge [1878] 7 Ch D 504 Dal Pont GE, Law of Costs (4th ed, LexisNexis Butterworths, Australia, 2018)
Dates of hearing:	11 December 2019, 20 May 2020
Registry:	South Australia
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	170
Counsel for the Plaintiff:	Mr M Livesey QC with Mr S Foreman (11/12/2019)
Mr S Foreman (20/5/2020)
Solicitor for the Plaintiff:	Lipman Karas
Counsel for the First, Fourth, Fifth and Sixth Defendants:	Mr T Duggan QC (11/12/2019)
Counsel for the Fourth, Fifth and Sixth Defendants:	Mr M Jackson (20/5/2020)
Solicitor for the Fourth, Fifth and Sixth Defendants:	Crawford Legal
Counsel for the Second and Third Defendants:	Mr I Robertson SC with Ms S Heidenreich
Solicitor for the Second and Third Defendants:	O’Loughlins Lawyers

SAD 12 of 2018
IN THE MATTER OF CONCRETE SUPPLY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
BETWEEN:	ADELAIDE BRIGHTON CEMENT LIMITED ACN 007 870 199 Plaintiff
AND:	CONCRETE SUPPLY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 007 848 580 First Defendant DOMINIC CHARLES CANTONE IN HIS CAPACITY AS ADMINISTRATOR OF CONCRETE SUPPLY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) Second Defendant NICHOLAS DAVID COOPER IN HIS CAPACITY AS ADMINISTRATOR OF CONCRETE SUPPLY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (and others named in the Schedule) Third Defendant

Item	Provision	Description of application
…	…	…
12	Section 90-20 of the Insolvency Practice Schedule (Corporations)	For an order under section 90-15 of the Insolvency Practice Schedule (Corporations) in relation to the external administration of a company

SAD 12 of 2018
Defendants
Fourth Defendant:	PELEGRINO OBBIETTIVO
Fifth Defendant:	GENESIO OBBIETTIVO
Sixth Defendant:	TINA OBBIETTIVO