ADX Building Systems Pty v Adelaide Fibrous Plasterboard Linings Pty Ltd (In Liq)
[2009] SADC 7
•29 January 2009
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
ADX BUILDING SYSTEMS PTY & ANOR v ADELAIDE FIBROUS PLASTERBOARD LININGS P/L (IN LIQ) & ORS
[2009] SADC 7
Judgment of His Honour Judge Millsteed
29 January 2009
PROCEDURE - COSTS - APPEALS AS TO COSTS
Appeal against orders made by a Master that liquidators (non-parties) of the first defendant personally pay the costs of the plaintiff and the second defendant on an indemnity basis by reason of the first defendant's opposition to consent orders sought by the plaintiff and the second defendant - whether first defendant had a proper interest in the application for consent orders when the action against the first defendant had been stayed by operation of s 471B of the Corporations Act - appeal dismissed.
Worker's Liens Act 1893 s 5, s 7(1), s 7(2), s 10(1), s 10(2)(a), s 16, s 32; Corporations Act 2001 (Cth) s 471B, s 513B, s 513C, s 588FA, s 588FC; District Court Act 1991 (SA) s 42(1), s 43; District Court Rules 2006 r 8; District Court Rules (1987) r 33.01, r 97.01; Companies Act 1962 (SA) s 293; Income Tax Assessment Act 1936 (Cth) s 218, referred to.
Re RGP Constructions Pty Ltd (In Liq); Ewing v Hallett Brick Industries Ltd (1982) 31 SASR 170; Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 26; Blackjack Executive Car Services v Koulax [2002] VSC 380; Fowler v Renmark and Paringa District Hospital Inc (1988) 51 SASR 506; Jewel River Pty Ltd v Captured Pty Ltd [2009] SADC 2; Beare v Light Regional Council [2008] SADC 72; Bent v Gough (1992) 36 FCR 204; Moyes v Anor v J & L Developments & Anor (No 3) [2007] SASC 268; Australian Securities and Investments Commission v West & Anor [2008] SASC 111; Health & Life Care Ltd (In Liq) v SA Asset Management Corp (1995) 18 ACSR 153; Re Emanuel (No 14) Pty Ltd (In Liq); Macks and another v Blacklaw & Shadforth Pty Ltd (1997) 147 ALR 281; Macquarie Health Corp Ltd and Others v Commissioner of Taxation (1999) 96 FCR 238; Harvey v Phillips (1956) 95 CLR 235, considered.
ADX BUILDING SYSTEMS PTY & ANOR v ADELAIDE FIBROUS PLASTERBOARD LININGS P/L (IN LIQ) & ORS
[2009] SADC 7INTRODUCTION
This is an appeal by the first defendant, Adelaide Fibrous Plasterboard Linings Pty Ltd (In Liquidation) (“AFPL”) and its liquidators, Peter Ivan Macks and Timothy James Clifton (“the Liquidators”) against orders made by a master that the Liquidators (non parties) personally pay the costs of the plaintiff, ADX Building Systems Pty (“ADX”), and the second defendant, Martin Towers Pty Ltd (“Martin Towers”), on an indemnity basis, by reason of AFPL’s opposition to consent orders sought by ADX and Martin Towers.
FACTUAL BACKGROUND
Martin Towers was at all relevant times the registered proprietor of land situated at 223 North Terrace, Adelaide. In 2004 Martin Towers contracted builders, John Hindmarsh (SA) Pty Ltd (“Hindmarsh”), to construct an apartment complex on the land. Hindmarsh sub-contracted AFPL to carry out certain works in relation to the development.
AFPL entered into a contract for ADX to supply it with building materials. Materials were supplied to AFPL by ADX over the period of March to September 2005. ADX then ceased to supply further building materials by reason of AFPL’s alleged failure to pay ADX the sum of $80,112.23 for materials already supplied. ADX also sought payment from AFPL of interest in the sum of $16,034.90.
On 3 August 2006 ADX served on AFPL a demand under s 10(2)(a) of the Worker’s Liens Act 1893 (“the Act”) requiring payment from AFPL of the sum of $96,147.13. AFPL failed to pay.
On 4 August 2006 ADX registered a lien over Martin Towers’ land for the sum of $96,147.13 pursuant to s 10(1) of the Act.
On 11 August 2006 Martin Towers (in order to discharge the lien) deposited with the Registrar General the amount claimed in respect of the lien pursuant to s 16 of the Act.
On 18 August 2006 ADX commenced proceedings in this court claiming, as against AFPL payment of $96,147.13 and, in the alternative, as against Martin Towers, an order that all of the moneys deposited with the Registrar General be released and paid to ADX.
AFPL went into voluntary administration on 3 October 2006. On 30 October 2006 AFPL went into liquidation following a resolution by creditors pursuant to s 439C(c) of the Corporations Act 2001 (Cth). Thereafter no steps were taken by ADX to prosecute its claim against AFPL by virtue of the operation of s 471B of the Corporations Act.
The action first came before the court for a status hearing on 8 February 2007. ADX was represented by Mr C Munt from Doman Lawyers and Martin Towers by Mr D Davies from David Deakin Davies & Co. There was no appearance by AFPL.
On 22 March 2007, the matter came back on for a further status hearing. On this occasion Mr M. Fabbro from Ezra Legal, solicitors, announced that he was appearing on behalf of AFPL. Mr Munt objected on the basis that ADX was no longer prosecuting its claim against AFPL by reason of it being in liquidation and the claim against it being stayed by operation of s 471B of the Corporations Act. The proceedings were adjourned.
Later that day, Mr Fabbro telephoned Mr Munt and asserted that AFPL had a right to be heard under s 32 of the Act. That section provides:
Any person alleging that he is prejudicially affected by a claim, lien or charge, or by registration under the Act, may at any time apply to the court to have such claim or registration cancelled or the effect thereof modified, and any such order may be made as may be deemed just.
Mr Fabbro further stated that he expected to obtain instructions to issue an application to be heard in the matter. No such application was ever issued.
On 11 July 2007 ADX filed an Amended Statement of Claim wherein it no longer sought relief as against AFPL.
On 12 July 2007 the matter came back before the court for a directions hearing and was then adjourned to 6 September 2007 for a further directions hearing.
On 6 September 2007 there was no appearance on behalf of AFPL and the matter was set down for a Listing Conference on 20 September 2007. There was no appearance on behalf of AFPL at the Listing Conference.
In October 2007 the action settled as between ADX and Martin Towers.
By letter dated 12 November 2007 David Deakin Davies & Co, on behalf of Martin Towers, served both Doman Lawyers and Ezra Legal with an application for a hearing to obtain consent orders that the Registrar General pay ADX $60,000 and Martin Towers $20,112.23 from the moneys deposited on 11 August 2006.
On 13 November 2007 there was an exchange of e-mails between Mr Munt of Doman Lawyers and Mr Davies of David Deakin Davies & Co wherein:
·Mr Munt indicated that an electronic application for consent orders would be more expeditious.
·Mr Davies informed Mr Munt that pursuant to Practice Direction 52 sub-paragraph 9.1.2 the e-mail message must “certify that all the relevant parties have seen the consent to the order” and pointed out that AFPL had refused to consent to the application.
·Mr Munt replied that he did not consider AFPL to be a “relevant party” because it was no longer involved in the litigation.
·Mr Davies asked Mr Munt whether, in the light of AFPL’s opposition to the application, he wanted to take the risk that Mr Fabbro might contend that the electronic application was irregular.
·Mr Munt then agreed that it was appropriate to make a formal application for consent orders if Mr Fabbro had indicated to Mr Davies that he wanted to be heard on the application.
Following these communications Mr Davies sent the following letter to Mr Fabbro dated 13 November 2007:
Dear Sir,
…
I have been informed by Master Norman’s Personal Assistant that:
1.My client’s application dated 12 November 2007 has been listed for hearing on 22 November 2007 at 12.15 pm.
2.The Master has indicated that he is prepared to make the orders sought without the need of the attendance of the parties’ representatives if evidence of the consent of all parties is produced to him.
I enclose (*) Minutes of Order. If your instructions are to consent to the orders would you record your consent on the foot of the Minutes and return them to me.
Yours faithfully
David Deakin Davies &Co.
On 20 November 2007 Mr Munt received a facsimile from Mr Fabbro dated 19 November 2007 stating that AFPL would not consent to the orders sought for the following reasons:
The payment of $60,000 is clearly intended to be made in payment, or part payment, of a debt claimed to be owing to ADX by AFPL.
ADX is not a secured creditor of AFPL. Although ADX may have had a valid lien against the property of Martin Towers, ADX never had any security over any property owned by AFPL.
You will be familiar with the decision of the Full Court of the Supreme Court in In re R G P Constructions Pty Ltd (In Liquidation); Ewing v Hallett Brick Industries Ltd (1982) 31 SASR 170, that case establishes clearly that a supplier of materials to a building site may have a lien on the land but does not have a charge on any payment due to the builder or any subcontractor. In the absence of such a charge, the supplier is an unsecured creditor in the liquidation of the builder or sub-contractor to whom the materials were supplied.
We point out therefore that any payment which ADX obtains from the second defendant by the enforcement of ADX’s lien gives rise to an unfair preference in the liquidation of AFPL.
For this reason, AFPL is not in a position to consent to the payment of $60,000 to ADX out of the funds paid to the Registrar General. Further, our client reserves its rights to proceed against ADX for the recovery as a preference of any amount which ADX obtains from Martin Towers under the lien, or to take such other action as it is advised in order to maintain its position.
Mr Munt responded to the facsimile by letter, dated 20 November 2007, rejecting the grounds upon which AFPL sought to justify its opposition to the consent orders and reiterating his client’s contention that AFPL no longer had standing in the proceedings. He further advised that he had communicated to Martin Towers’ solicitors ADX’s view that there was no requirement for the application for consent orders to be served on AFPL.
On 22 November 2007 the Master heard the application for consent orders. Mr B Jenner, of counsel, appeared for AFPL. He opposed the application. The matter was adjourned for argument to 28 November 2007.
On 23 November 2007 AFPL filed and served on ADX and Martin Towers an outline of submissions.[1] The outline indicated that opposition to the application was based on the decision in Re RGP Constructions Pty Ltd (In Liq); Ewing v Hallett Brick Industries[2] that a mere supplier of materials, such as ADX, is not entitled to claim a charge over moneys held under the Act. There was no specific reference to a preference claim as foreshadowed in the facsimile from Ezra Legal on 19 November 2007. However, the outline did state that “the effect of the consent orders would be to elevate the plaintiff to the position of a secured creditor in the liquidation when it has no legal entitlement to that status and when that would be to the ultimate detriment of the other unsecured creditors”.
[1] Appeal Book 124-126
[2] (1982) 31 SASR 170
On 23 November 2007 Doman Lawyers wrote to Ezra Legal in response to AFPL’s outline of submissions stating that there was no basis for AFPL’s intervention because it was not an active party to the proceedings due to the operation of s 471B of the Corporations Act. Ezra Legal were advised that if AFPL contended that it had a right to intervene, it should identify the grounds justifying such intervention and file a formal application. The letter emphasised that AFPL’s reliance on the decision in Re RGP Constructions (In Liq) was misconceived because ADX claimed a lien over the land and not a charge on moneys payable to AFPL. The letter put the Liquidators on notice that ADX would seek an order for costs, on a solicitor-client or indemnity basis, against them personally by reason of AFPL’s intervention. The Liquidators were invited to withdraw their objection.
On 27 November 2007 Ezra Legal wrote to Doman Lawyers and David Deakin Davies & Co advising that AFPL would consent to the orders sought on the condition that the orders reflected the fact that AFPL reserved the right to institute proceedings to recover the amount received by ADX.
On 28 November 2007 the application for consent orders came on for hearing. Mr Jenner, on behalf of AFPL, consented to the orders sought on the condition foreshadowed in Mr Fabbro’s letter of 27 November. Mr Munt and Dr Bleby, of Counsel (on behalf of ADX and Martin Towers respectively), applied for costs against the Liquidators personally. The Master made the consent orders but adjourned the claim for costs. The Master granted AFPL and the Liquidators leave to file affidavit material and written submissions in relation to the application for costs by 12 December 2007 and 9 January 2008, respectively. ADX and Martin Towers were granted leave to file answering affidavits and written submissions by 23 January 2008.
On 30 November 2007 Ezra Legal wrote to Doman Lawyers and David Deakin Davies & Co asserting that their applications for cost orders were without merit and foreshadowing an application for costs against their respective clients should their applications fail.
Mr Davies responded to Ezra Legal by letter dated 3 December 2007 stating, in part:
It should not have come as a surprise to the liquidators or their legal advisors that an application for costs was made against the liquidators personally at the last attendance. I told Mr Jenner in the presence of Mr Fabbro in the elevator after the attendance on Thursday 22 November 2007 that my client would be seeking a costs order against Mr Macks personally …
On 4 January 2008 ADX filed a Notice of Discontinuance of the whole of its action. On the same day ADX’ s solicitors wrote to AFPL’s solicitors stating that the filing of the Notice was without prejudice to its claim for costs against AFPL and the Liquidators.
Pursuant to the orders the Master made on 28 November 2007 the solicitors for ADX filed written submissions later that day. On 22 January 2008 they filed further written submissions and an affidavit from Mr Munt, sworn on 8 January 2008. On 23 January 2008 Martin Towers’ solicitors filed written submissions and an affidavit from Ms K McAuliffe, sworn on 19 December 2007.
AFPL’s solicitors sent a letter to the court on 10 January 2008 (copies supplied to the other parties) and on 1 February 2008 filed written submissions on behalf of AFPL and the Liquidators. In both the letter and the written submissions it was contended that because of the Notice of Discontinuance there were no proceedings on foot and therefore no basis upon which the Court could make any further orders as to costs.
The written submissions further asserted that no costs orders should be made against the Liquidators because the Liquidators and AFPL had acted reasonably in opposing the application for consent orders. For reasons that I will discuss in more detail later, it was submitted that AFPL had a legitimate interest in the moneys held by the Registrar General by reason of an action instituted in the Supreme Court in 2006 by AFPL against Hindmarsh, as first defendant, and Martin Towers, as second defendant. In that action AFPL claimed payments totalling $822,617.24 under its contract with Hindmarsh. The precise nature of AFPL’s claim against Martin Towers is not apparent on the papers before me. Presumably, it was of a contractual nature. Whatever the precise nature of AFPL’s claim against Martin Towers may have been, it was dismissed pursuant to a consent order made by the Supreme Court on 21 February 2007.
On 4 April 2007 Hindmarsh filed an amended defence and counterclaim. In the amended defence Hindmarsh pleaded that Martin Towers had deducted from a progress payment owed to Hindmarsh the moneys that Martin Towers had deposited with the Registrar General. Hindmarsh claimed the amount paid to the Registrar General by Martin Towers together with legal costs.[3]
[3] On 14 May 2008 Hindmarsh further amended its pleadings claiming that that the loss and damage it had suffered comprised $60,000 together with legal costs
AFPL’s written submissions filed on 1 February 2008 contended that the funds which were the subject of AFPL’s claim “were moneys which in the ordinary course should have been paid by [Martin Towers] to the builder and then to [AFPL]. Accordingly, [AFPL] had an interest in the moneys deposited with the Registrar General”.
On 4 March 2008 an affidavit from Mr Macks, sworn on 1 February 2008, was filed with the court wherein he deposed:
1.I am one of the liquidators of the first defendant in these proceedings along with Timothy James Clifton, however, I have been appraised of these proceedings and the liquidation more generally more so than Mr Clifton. I swear this affidavit on our joint behalf in our capacity as joint liquidators of the First Defendant.
2.I am advised by my solicitor, Michael Fabbro, being a person known to me to be of good repute and verily believe that he was first made aware of the second defendant’s application for orders on Tuesday 13 November 2007 when the solicitors for the second defendant wrote and inter alia:-
2.1 Advised that it’s client’s application issued on 12 November 2007 was returnable on 22 November 2007 with application for argument on Thursday 22 November 2007;
2.2 seeking the “consent of all parties”.
3.The application and its affidavit made it clear that the plaintiff and the second defendant had arrived at an agreement for the dispersal of the funds held by the Registrar General without any reference to the liquidators whatsoever.
4.At the time my solicitor was served with the application referred to in paragraph 2, I was in New Zealand and did not return until Monday 19 November 2007 so was not in a position to consider the application prior to that time, which was only three days prior to the hearing.
5.I was of the view and remain of the view, that any payment to the plaintiff would constitute a preference payment.
6.In the circumstances where I was of the view that any payment to the plaintiff would constitute a preference payment I did not think it was appropriate for the first defendant to be seen to be formally consenting to the payment to the plaintiff contemplated in these orders.
7.Any payment would also reduce the claim of the first defendant in the proceedings on foot in the Supreme Court against the builder, John Hindmarsh (South Australia) Pty Ltd (“Hindmarsh”), as Hindmarsh are claiming a set-off for monies the second defendant had deducted from payments due to it on account of the monies the second defendant had paid to the Registrar General in response to the lien lodged by the plaintiff.
8.In all of the circumstances I felt obligated to fully consider the position of the first defendant in respect of the orders sought and wanted an opportunity to consider the matter more generally and the position of the first defendant in consultation with my barrister.
9. I was unable to confer with my barrister until Tuesday 27 November.
10.After conferring with my barrister I instructed my solicitor to advise the plaintiff and the second defendant that the first defendant was prepared to consent to the orders sought on the basis that it was noted in the orders that the first defendant reserved its position to institute recovery proceedings for the amount received by the plaintiff. ...
11.The liquidators obtained no personal benefit in respect of the matters referred to herein other than discharging our obligations to creditors generally in our capacity as liquidators of the first defendant.
…
On 4 March 2008 the Master refused to make the consent orders sought by Martin Towers and ADX because of the discontinuance point raised by AFPL and gave written reasons for his decision. However, the Master considered that ADX and Martin Towers should be given an opportunity to file written submissions addressing the discontinuance point because it was raised by AFPL for the first time in written submissions filed out of time.
The Master received written submissions in relation to the discontinuance point on 4 March 2008 from the solicitors for ADX, on 11 March 2008 from the solicitors for AFPL and the Liquidators and on 17 March 2008 from Martin Towers’ solicitors.
It was initially contemplated that the applications for costs made by ADX and Martin Towers would, unless otherwise requested by a party, proceed on the parties’ written submissions and the papers. However, the Master subsequently called the matter back on for oral argument. The hearing took place on 7 April 2008. Mr Munt and Dr Bleby appeared for ADX and Martin Towers respectively. Mr Jenner appeared for AFPL and the Liquidators.
THE MASTER’S DECISION
On 2 May 2008 the Master published his decision.
The Master rejected the argument advanced by AFPL and the Liquidators that the filing of the Notice of Discontinuance prevented ADX and Martin Towers from pursuing their application for costs, in accordance with the decisions in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation,[4] Blackjack Executive Car Services v Koulax[5] and Fowler v Renmark and Paringa District Hospital Inc.[6]
[4] [2001] HCA 26
[5] [2002] VSC 380
[6] (1988) 51 SASR 506
The Master also granted the costs orders sought by ADX and Martin Towers for the following reasons:
Conclusion and Findings
117I have already referred to section 42 (1) of the District Court Act which enables the court an unfettered discretion to award costs against non-parties to litigation, including liquidators.
118The plaintiff’s claim in these proceedings against the first defendant had been stayed by the operation of section 471(B) of the Corporations Act. In these circumstances the first defendant was no longer an active party to the proceedings and had no automatic right of appearance.
119Although the first defendant appeared to have claimed an interest in the subject matter of the proceedings this interest could only have been pursued by it as an intervener under 1987 Rule 33.01 but no such application or affidavit in support had been filed.
120In issuing proceedings and seeking recovery, the plaintiff was not seeking to enforce a charge. It was enlivening its statutory right under section 21 of the Worker’s Liens Act to seek recovery of monies.
121The first defendant’s allegation was that the payment was a preference. However this would not appear to have given the first defendant any basis to intervene in the proceedings because it could not prevent a payment from being made by the Lands Titles Office.
122It appears that the plaintiff and the second defendant arrived at a compromise to the issues between them could be resolved on a commercial basis. The first defendant was not a party to this compromise, but it had chosen to intervene. It had expressly indicated that the proposed order was opposed, in contrast to contending that it wanted time to consider its position.
123It is clear from Mr Munt’s letter of 23 November 2007, exhibit CPM 4 to his affidavit of 8 January 2008 (FDN 25) that the liquidators were put on notice that their intervention was bound to fail and that costs were to be sought against them personally.
124Likewise, the second defendant made its position clear to the liquidators in a letter of 3 December 2007. I refer to exhibit KMC 1 to Ms McAuliffe’s affirmation of 19 December 2007 FDN 23.
125Mr Macks, one of the liquidators, has in his affidavit filed in opposition to the costs claim, stated that he had not been in a position to consider the application of the consent order and that he had felt obliged to fully consider the first defendant’s position. However after conferring with his counsel, he had instructed his solicitor that the first defendant was prepared to consent to the orders. In these circumstances, the liquidators contend, they had acted reasonably. They had been discharging their statutory duty and seeking to best protect the interests of the creditors.
126It is clear, however, that costs might be awarded against a liquidator even where there has not been misconduct or misfeasance – Kim Tran, supra. In Health and Life Care, a costs order was made against the liquidators, and upheld on appeal to the Full Court, when although they were protecting the rights of unsecured creditors they had caused additional costs to be incurred by a party.
127In the present case the liquidators went beyond intimating that they could not consent to an order. They indicated that they positively opposed it. The matter was adjourned for argument.
128The opposition was unlikely to succeed having regard to the submissions made by the plaintiff and the second defendant.
129Taking all these factors into account, I have come to the determination that it is appropriate to make orders that the liquidators pay the costs of the plaintiff and the second defendant occasioned by reason of the first defendant’s opposition to the consent orders sought to be made by the plaintiff and the second defendant.
130In all the circumstances, I have also determined that these costs shall be paid on an indemnity basis. It was made quite clear to the first defendant by the plaintiff and second defendant that the first defendant had no possible entitlement to or interest in the monies deposited by the second defendant with the Registrar General. It was not required to be a party to the settlement between the plaintiff and the second defendant, and it has no legitimate interest in the subject matter of that settlement. In the circumstances, neither the plaintiff nor the second defendant should be penalised by having to bear themselves the costs occasioned by them, by reason of the approach taken by the liquidators as controllers of the first defendant.
The Master then made the following orders:
1.I find that notwithstanding the discontinuance of these proceedings it is open for the plaintiff and the first defendant to seek costs orders against the non-parties being the liquidators of the first defendant.
2.I order that the liquidators of the first (sic) defendant personally pay the costs of the plaintiff and the first defendant occasioned by reason of the first defendants opposition to the consent orders sought by the plaintiff and the first (sic) defendant.
3.These costs are to be paid on an indemnity basis and adjudicated if not agreed.
4.I fix a Directions Hearing on Monday 4 August 2008 at 10am to consider any applications for the costs occasioned by the argument.
GROUNDS OF APPEAL
By Notice of Appeal filed on 23 May 2008 AFPL and the Liquidators appeal against the Master’s decision on the following grounds:
1.The learned Master erred as a matter of law in allowing the plaintiff and the second defendant to proceed with an oral application for costs against non parties when those two parties had failed to place before the Court the Deed of Compromise which obligated, so it was alleged, the plaintiff to discontinue the action. The Court should not have permitted the applications to proceed in the absence of a disclosure of that Deed to the non parties.
2.The learned Master erred as a matter of law in finding at Reasons [118] that the first defendant had no right of appearance by reason of s 471(B) of the Corporations Act when:-
a. The matter was not argued;
b. Neither the plaintiff and the second defendant opposed the appearance of the first defendant at the hearing on 28 November 2007 when consent orders were made with a reservation of the first defendant’s rights.
3.The learned Master erred as a matter of law in finding at Reasons [119] that the first defendant could only have appeared at any hearing on the application dated 12 November 2007 if it had applied to intervene under DCR R33.01 of the 1987 Rules when:-
a.The matter was not argued;
b. Neither the plaintiff and the second defendant opposed the appearance of the first defendant at the hearing on (sic) of the application dated 12 November 2007 on 28 November 2007 when consent orders were made with a reservation of the first defendant’s rights.
4.The learned Master erred as a matter of law in considering the question of costs (on the basis of the likely outcome of the first defendant’s foreshadowed argument opposing the consent orders) when:-
a.The matter was not argued;
b.Consent orders were made with a reservation of the first defendant’s rights.
5.The learned Master erred as a matter of fact and law in finding at [122] that the first defendant had chosen to intervene in respect of the consent orders necessary to give effect to the compromise when in fact, as the learned Master has found, the first defendant’s consent to those orders had previously been sought by the second defendant.
6.The learned Master failed to have any, or any proper, regard to the history of the matter from 19 November 2007 to 28 November 2007 and, in the light of that history should have found that the non parties acted reasonably and that any application against them for costs personally should be dismissed.
7.The learned Master erred as a matter of law in finding at [129] that a proper basis existed for the making of an order for costs against the non parties.
8.The learned Master erred as a matter of law in finding at [130] that a proper basis existed for the making of an order that the costs to be paid by the non parties should be on an indemnity basis.
It is to be observed that grounds 1 to 7 challenge order 2 and ground 8 challenges order 3. There is no complaint about order 1 (which is in fact in the nature of a finding) that the discontinuance of the proceedings did not prevent the making of cost orders.
NATURE OF APPEAL
Before I turn to consider the grounds of appeal, and the competing arguments advanced by counsel on the hearing of the appeal, it is convenient to make some observations about the nature of an appeal from a Master’s decision.
An appeal lies from a judgment made by a Master of this Court pursuant to s 43 of the District Court Act 1991 (SA). The appeal is by way of rehearing, the nature of which is governed by the Rules of Court. The present appeal was commenced after the District Court Civil Rules 2006 (“the 2006 Rules”) came into operation on 4 September 2006. Accordingly, the 2006 Rules apply to this appeal (see r 8) rather than old rule 97.01.
On the hearing of this appeal Mr Jenner acknowledged that it was necessary for AFPL to establish that the Master erred in fact or law in the exercise of his discretion. However, in his written submissions filed in advance of the hearing he contended that there has been no change in respect of the nature of an appeal under the 2006 Rules. These submissions are inconsistent. The written submissions are incorrect for the reasons I expressed in Jewel River Pty Ltd v Captured Pty Ltd,[7] set out below:
[7] [2009] SADC 2
Rule 97.01 of the old rules provided:
[That] an appeal pursuant to section 43(2) of the Act against interlocutory judgment of a Master shall be by way of rehearing and, in matters involving the exercise of a discretion, the Judge may exercise his own discretion without regard to the manner in which it was exercised in the decision, order or direction appealed against.
It is clear that under the old rule an appeal was a rehearing in which the judge could exercise any discretion afresh without regard to how it had been exercised by the Master, although the judge was not required to ignore the manner in which the Master had exercised the discretion.[8]
[8] O’Brien Lovrinov Crafter Pty Ltd v Corrandini [1999] SASC 159 per Martin J at [20]
The present rules differ as to the nature of a rehearing. Rule 292 states:
(1) An appeal is to be by way of rehearing (unless the law under which the appeal is brought provides to the contrary).
(2) Subject to any limitation on its own powers arising apart from these rules, the Court may determine an appeal as the justice of the case requires despite the failure of the parties to an appeal to raise relevant grounds of appeal, or to state grounds of appeal appropriately, in the notice of appeal.
(3) Subject to any limitation on its powers arising from these rules, the Court may
(a)draw inferences of fact from evidence taken at the original hearing and, in its own discretion, hear further evidence on a question of fact;
(b)amend or set aside the judgment subject to appeal and give any judgment that the justice of the case requires;
(c) remit the case or part of the case for rehearing or reconsideration;
(d) make orders for the costs of the appeal.
In Beare v Light Regional Council[9] Tilmouth DCJ expressed the view that r 292 provides for a rehearing at large and that it is not necessary to identify error before a Judge on appeal can interfere.
[9] [2008] SADC 72
I respectfully disagree. Rule 292 omits the words contained in the old rule which enabled an appellate judge to exercise his or her discretion “without regard to the manner in which it was exercised in the decision, order or direction appealed against”. In my view this change reflects an intention to narrow the scope of the rehearing so that upon an appeal, against an exercise of discretion, the judge is not entitled to substitute his or her discretion unless some error in the manner in which the Master exercised the discretion has been established.[10] In other words the principles expressed by the High Court in House v The King[11] apply.
This interpretation accords with the decision in George v Dowling[12] where Mullighan J had occasion to consider amendments made in 1987 to r 97.03 of the Supreme Court Rules. In its original form the rule provided that appeals from Masters to a single Judge were to be by way of rehearing however, the Judge was free to exercise his own discretion without regard to the manner in which the discretion had been exercised by the Master. The new rule simply provided that appeals from Masters were to be by way of rehearing.
Mullighan J made the following observations about the effect of the amendment:[13]
It may readily be seen that the change in the rule to its present form … altered the nature of an appeal from a master. Prior to that alteration an appeal from a master was, in my view, an appeal by way of rehearing … and where the appeal was from the exercise of a discretion, the judge hearing the appeal could exercise the discretion afresh upon the material before him without regard to the manner in which it was exercised by the master. Now, although the rule provides that an appeal from a master is an appeal by way of rehearing, it is of a different nature. The amendment to the rule removing the power to receive further evidence and to exercise a discretion afresh makes that plain. Now the question on appeal from a master is whether his decision ought to be affirmed or overturned in light of the material which was before him and where it involved the exercise of a discretion, some error must be established: Stirling District Council v Casley-Smith (1989) 50 SASR 297, per Perry J at 311; Mullett v Gabriel (1989) 52 SASR 330, per O’Loughlin J at 333; Remm Construction (SA) Pty Ltd v Wallbridge & Gilbert Pty Ltd (unreported, Supreme Court, SA, Mullighan J, No 3090, 28 October 1991)
These remarks apply with equal force to the changes made by r 292.
It should be noted that r 292 also operates as a rule of the Supreme Court. It follows that if the construction adopted in Beare is correct then it should also apply to Supreme Court appeals. However, there are a number of decisions of the Supreme Court, which counsel have drawn to my attention, where the principles expressed in House v The King have been applied to appeals regulated by r 292.[14]
In my view the principles governing appeals under r 292 are accurately summarised by Simpson DCJ in Bennett v WMC (Olympic Dam Corporation) Pty Ltd in the following passage:[15]
There is no rule which allows the Judge to exercise his own discretion without regard to the manner in which it was exercised by the Master. While the appeal is in the nature of a rehearing, it is nevertheless relevant to bear in mind the principles which guide an appeal from a discretionary decision on an interlocutory application, i.e., there is a strong presumption in favour of the correctness of the decision appealed from and the decision should be affirmed unless the court is satisfied that the decision is the product of the decision maker acting on a wrong principle, or giving weight to extraneous or irrelevant matters, or failing to give weight or sufficient weight to relevant considerations, or making a mistake as to the facts. It is not enough to find that if I had been in the position of the learned Master, I would have taken a different course or exercised the discretion differently. (Australian Coal and Shale Employees’ Federation v Commonwealth (1953) 94 CLR 621 at 627: House v The King (1936) 55 CLR 499 at 504-505; Mullett and another v Gabriel and another (1989) 52 SASR 330 at 333; Thomas v Thomas [2000] SASC 408).
[10] see George v Dowling (1992) 57 SASR 579 per Mullighan J at 582
[11] (1936) 55 CLR 499 at 505
[12] (1992) 57 SASR 579
[13] Ibid at 582
[14] see for example: Manos v Maros (2007) 249 LSJS 67 at [41], [50] FMV Stanke Holdings Pty Ltd v O’Meara (2007) 252 LSJS 87 at [141]
[15] above n 7 at [4]
So, in the present appeal, for the Liquidators to succeed they must demonstrate that the Master’s exercise of discretion miscarried by reason of error of law or fact. As I say, this was accepted by Mr Jenner despite his contention that appeals under the 2006 Rules and the old rules are of the same nature.
COSTS: GENERAL PRINCIPLES
The court has a wide discretion to award costs pursuant to s 42 (1) of the District Court Act, but it is one which must be exercised judicially. The discretion extends to making an order against a non party including the liquidator of an unsuccessful litigant.[16] However, when considering whether an order for costs should be made against a liquidator personally the court must have regard to the special position of a liquidator. This was emphasised by the Federal Court in Bent v Gough where Black CJ said:[17]
[16] see Bent v Gough (1992) 36 FCR 204, Health & Life Care Ltd (In Liq) v SA Asset Management Corp (1995) 18 ACSR 153 and Emanuel v Hedley (No 2) [1997] ACTSC 108
[17] Ibid at 211
In my view, it has not been shown that Fogarty J was in error in the way in which he dealt with these important matters. His Honour noted that the circumstances where a person who is not a party is ordered to pay costs need to be “exceptional or unusual and of a compelling nature [or] power” and His Honour added:
This is particularly so in a case such as this where the liquidator initiated the proceedings in his capacity as liquidator, a capacity which carries with it the connotations of an officer of the court and a person carrying out a public duty.
Later His Honour said:
It would not be in the interests of justice if liquidators were discouraged from performing their largely public duty and duty as officers of the court in taking curial proceedings because of the risk of having to bear personally the costs if the litigation proved unsuccessful.
His Honour’s references to “unusual” circumstances was not a reference to circumstances that were merely unusual and not otherwise compelling. He expressly referred to the need for the circumstances to be of a compelling nature and I think it clear that his discretion was exercised on that basis. In the great majority of cases it would no doubt not be right to order a liquidator who is not a party to pay costs personally but I agree with Northrop and Ryan JJ that it has not been shown that the discretion to order the payment of costs by the liquidator personally in this case has miscarried.
Similarly, the other members of the court, Northrop and Ryan JJ said:[18]
It was also conceded on behalf of the appellant that Fogarty J correctly took into account the need not to discourage liquidators from performing their public duty in pursuing litigation by an undue readiness to impose on them personal liability for the costs of successful parties. However, it was then said that the reference to Laboudis v Casey (1990) 170 CLR 534 distracted attention from “the real issue”. We do not understand His Honour to have given himself any direction other than that the discretion should be exercised sparingly, not by way of punishing an imprudent liquidator, but only where the circumstances make it just or appropriate for the successful party to be indemnified against his or her costs. We regard that approach as unexceptionable.
[18] Ibid at 219
As Mason CJ and Deane J observed in Knight v FP Special Assets Ltd[19] the overarching consideration is whether the interests of justice require that the order be made. Their Honours said:[20]
For our part, we consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.
[19] (1992) 174 CLR 178
[20] Ibid at 192-193
The general principles on which costs will be awarded, on an indemnity basis, were summarised by Debelle J in Moyes & Anor v J & L Developments & Anor (No 3) in the following passage:[21]
As a general rule, costs in adversary litigation are awarded on a party and party basis. However, the court will depart from its normal practice in certain circumstances: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 230, where the principles and some relevant decisions are reviewed. Such an order can only be made where the circumstances justify a departure from the ordinary principle: Colgate-Palmolive at 232 and 233. Those principles have been affirmed by the Full Court of the Federal Court in re Wilcox; ex parte Venture Industries Pty Ltd (No.2) (1996) 72 FCR 151 at 152 to 153 per Black CJ and at 156 to 158 per Cooper and Merkel JJ. See also Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163 at [7]-[9]. The categories warranting the exercise of the discretion are not closed: Colgate-Palmolive at 233 and re Wilcox at 153. Care must be taken not to circumscribe the width of the Court’s discretion as to costs.
[21] Ibid at [5]
Debelle J then referred to some of the instances that can give rise to an appropriate exercise of the discretion to award indemnity costs:
The circumstances in which a court may appropriately order costs to be paid on an indemnity basis are, generally speaking, associated with the conduct of the litigation. The instances mentioned in Colgate-Palmolive include the making of allegations that ought never have been made, the undue prolongation of a case by groundless contentions and an imprudent refusal of an offer to compromise. Another instance is where an action has been commenced or continued where the applicant, properly advised, should have known that he had no chance of success: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; see also J-Corp Pty Ltd v Australian Builders Labourers’ Federation Union of Workers (Western Australian Branch) (No 2) (1993) 46 IR 301.
(emphasis added)
In Australian Securities and Investments Commission v West & Anor[22] Gray J made the following observations about indemnity costs:[23]
Although the Court has an unfettered discretion with respect to costs, the discretion must be exercised judicially. The ordinary rule is that costs are awarded as between party and party, unless some special or unusual feature of the case justifies departure from the usual rule. As was recognised by Kirby P in Walton v McBride, the power of the Supreme Court to award a special measure of costs is found in the Rules of Court, and the inherent jurisdiction of the Court as a superior court of general jurisdiction. More recently, in Ruhani v Director of Police, Kirby J observed:
It is true that this Court, by its costs order, normally provides only for the party and party costs of a successful litigant. … A larger costs order, whether for indemnity or solicitor and client costs, will not usually be made, … unless some feature of the litigation convinces the Court that the party entitled to costs should have a special order. Instances in which such orders are made include where the opponent’s conduct has been “plainly unreasonable”, pursued for “an ulterior or collateral purpose” [PRCZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24 at [36]], undertaken in an “unmeritorious, deliberate or high-handed” way [NSW Medical Defence Union Ltd v Crawford (1993) 31 NSWLR 469 at 494], or where that opponent has been shown to be guilty of “unreasonable conduct, albeit that it need not rise as high as vexation” [Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616].
It remains to say that the existence of particular facts and circumstances capable of warranting a special costs order does not mean that a judge is necessarily obliged to exercise the discretion to make an order. The costs are always in the discretion of the judge, provided that discretion is exercised judicially. The question must always be whether the particular facts and circumstances of the case warrant a departure from the usual rule that costs be awarded on a party and party basis.
[22] [2008] SASC 111
[23] Ibid at [214]
The power to award costs against a liquidator personally is not dependent upon the liquidator having acted unreasonably or with an improper motive. This is illustrated by the decision of the Full Court in Health & Life Care Ltd (In Liq) v SA Asset Management Corp.[24] The court considered an appeal against an order by the judge at first instance that liquidators personally pay the costs of proceedings on an indemnity basis. Doyle CJ, with whom Duggan and Nyland JJ agreed, said:[25]
The judge took the view that the liquidators had not acted improperly in litigating the issues before him. I agree with that. Some of the issues raised in this matter were by no means simple, and I do not think it can be said that it was unreasonable of the liquidators to have raised them. True it is that the liquidators raised these issues late in the piece, and they are open to criticism for that. They themselves acted somewhat inconsistently, sitting on this point for some time. But I do not think that this shows that they acted improperly, merely that they did not act in a timely fashion. They can be criticised for that, but I do not think that that is sufficient to entitle SAAMC to the order which it sought. In my opinion this is not a case in which the liquidators’ conduct was such that the ordinary rule should be departed from. They have not persisted with a hopeless case, they have not raised improper allegations, there is no funding of an improper motive; cf Colgate Palmolive Co v Cussons Pty Ltd; Bent v Gough. I would dismiss the cross-appeal against the refusal to order costs on an indemnity basis.
(citations omitted)
[24] (1995) 18 ACSR 153
[25] Ibid at 57
The implication of his Honour’s remarks is that if the liquidators had persisted with a hopeless case then an order for costs on an indemnity basis may have been warranted.
CONSIDERATION
Did AFPL have a proper interest in the application for consent orders?
Before I turn to the individual grounds of appeal it is convenient to consider whether or not AFPL had any legitimate interest in the application for application for consent orders.
As earlier mentioned it was put to the Master by Mr Jenner that ADX had no rights under the Act because it had merely supplied AFPL with materials (“the no rights argument”). It was submitted that AFPL and the Liquidators had an interest in presenting this argument because rejection of the application for consent orders would result in the moneys held by the Registrar General being returned to Martin Towers. This would have a “flow on” effect in that Martin Towers would be obliged to account to Hindmarsh, which in turn would be obliged to account to AFPL for those moneys. It was further contended that the effect of the consent orders would be to elevate ADX to the position of a secured creditor in the liquidation when it had no legal entitlement to that status and when that would be to the ultimate detriment of the other unsecured creditors.[26]
[26] see Outline of Submissions Appeal Book 126
The contention that ADX had no rights under the Act to the moneys held by the Registrar General was clearly wrong. The Act provides security for money due to workers employed by contractors and sub-contractors and to sub-contractors contracting with contractors in respect of work done and materials supplied in connection with building work. To give effect to this policy the Act creates rights of liens and charges. They are separate remedies and each is provided with its own machinery for enforcement.[27]
[27] Albert Del FabbroPty Ltd v Wilckens & Burnside Pty Ltd [1970] SASR 277 at 286
Pursuant to s 5 a contractor or sub-contractor will have a lien for the contract price on the estate or interest in land of any owner or occupier where the work has been done with the assent, express or implied, of the owner or occupier of the land or where the materials were, with the assent, express or implied, of the owner or occupier, used or intended to be used in or about work done, or intended to be done, to the land or to any fixture thereon.
Section 7 creates rights of charges. A worker is given a charge on money payable to the contractor or sub-contractor by whom he is employed (s 7 (1)). Pursuant to s 7 (2) a sub-contractor is given a charge on any money payable to the contractor or sub-contractor for the portion of the contract price payable to him in respect of work done or materials furnished or manufactured for the purposes of the contract.
The following definitions are contained in s 2:
contractor means a person (not being a sub-contractor) contracting with or employed by another person to do work, or to procure work to be done, or to furnish materials in connection with work
sub-contractor means a person contracting with, or employed by a contractor or sub-contractor to do work, or to procure work to be done, or to furnish materials in connection with work for the purposes of the contract.
In the present case ADX had a right of lien on the land owned by Martin Towers because it had contracted with AFPL to furnish it with materials that were used in connection with work done or intended to be done on the land. However, in accordance with the decision in Re RGP Constructions, ADX had no right of charge because it did not fall within the definition of sub-contractor. It had simply supplied materials. It had not furnished those materials “in connection with any work done by it for the purposes of the contract”.
As Mr Munt pointed out in his letter to Ezra Legal dated 23 November 2007, the “no rights argument” was destined to fail. The argument was based on a failure to appreciate the distinction between charges and liens under the Act, the effect of the decision in Re RGP Constructions and the nature of ADX’s action against Martin Towers though the Statement of Claim made it perfectly clear that ADX was seeking to enforce a lien. Nowhere did it plead that it was entitled to a charge.
It was not until the hearing of this appeal that Mr Jenner conceded, in the course of his oral submissions, that the “no rights argument” was wrong. Mr Jenner, however, contended that his client’s opposition to the application for consent orders was, nevertheless, justified. He submitted that if Martin Towers were entitled to the moneys held by the Registrar General, as Martin Towers had pleaded in its Defence, then arguably it would have to account to Hindmarsh, which in turn would have to account to AFPL for those moneys. He submitted that in those circumstances payment of the moneys held by the Registrar General to ADX could constitute an unfair preferential payment to an unsecured creditor for the purposes of the Corporations Act 2001. This argument was first raised in Mr Fabbro’s letter to Mr Munt dated 20 November 2007 but appears to have been raised in only an oblique way by AFPL in its written and oral submissions to the Master. The Master rejected the argument.[28]
[28] Master’s Reasons [121]
I turn to consider the merits of this claim.
A transaction of a company being wound up, after 23 June 1993, may be voidable under the provisions of Part 5.7B of the Corporations Act. Section 588 FE (2) states:
The transaction is voidable if:
(a) it is an insolvent transaction of the company: and
(b) it was entered into, or an act was done for the purpose of giving effect to it:
(i) during the six months ending on the relation - back day; or
(ii) after that day but on or before the day when the winding up began.
The company went into liquidation as a result of a creditors’ voluntary winding up following a period of voluntary administration that commenced on 3 October 2006. That day is therefore the “relation - back day” (see ss 9, 513B and 513C. In the present case Mr Munt has argued that that any payment of moneys to ADX by the Registrar General could not be a voidable transaction for the purposes of Part 5.7B because it would not have been entered into during the six months ending on the relation back day or before the day when the winding up began. On the other hand Mr Jenner submitted that the transaction occurred within that period because the Notice of Lien was registered in the Lands Titles Office on 4 August 2006. There is no need to determine this issue for reasons that will become apparent.
An “insolvent transaction” is defined in s 588 FC. The definition includes an “unfair preference” entered into at the time the company was insolvent. In the present case any payment to ADX by the Registrar General would, of course, take place at a time when AFPL is insolvent.
Section 588 FA defines “unfair preference” as follows:
A transaction is an unfair preference given by a company to a creditor of the company if, and only if:
(a)the company and the creditor are parties to the transaction (even if someone else is also a party); and
(b)the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company;
even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency.
It can be seen that under s 588 FA there is a requirement that the debtor company and the creditor are parties to a transaction before there can be a preferential payment. Section 9 defines “transaction” in the following terms:
“transaction”, in Part 5.7B, in relation to a body corporate or Part 5.7 body, means a transaction to which the body is a party, for example (but without limitation):
(a) conveyance, transfer or other disposition by the body of property of the body; and
(b) a charge created by the body on property of the body; and
(c) a guarantee given by the body; and
(d) a payment made by the body; and
(e) an obligation incurred by the body; and
(f) a release or waiver by the body; and
(g) a loan to the body;
and includes such a transaction that has been completed or given effect to, or that has terminated.
The unfair preference provisions apply, of course, only to payments made to unsecured creditors. There is some controversy in this state as to whether the holder of a lien under the Act is a secured creditor. In Re Trademark Homes (Aust) Pty Ltd[29] Lander J found that a lien holder was a secured creditor for the purposes of the Corporations Law. In that case land owned by the debtor company was subject to liens under the Act. The liquidator sought directions of the court pursuant to s 479 of the Corporations Law as to whether the lien holders had a charge as against the company’s unsecured creditors.
[29] (1996) 67 SASR 107
Lander J said:[30]
In my opinion, the whole scheme of the Act suggests that a person who is able to register a lien and in due course prove an entitlement to a sum of money under either s4 or s5 of the Act, is entitled to claim that the lien secures the sum of money against the land of the owner or occupier. If the moneys remain unpaid, the lien holder is, in my opinion, entitled to sell the land and apply the proceeds against the amount of the wages or contract price outstanding.
[30] Ibid at 116
After considering several authorities Lander J concluded:[31]
In my opinion the High Court decision in Stapleton and the Full Court decision in Albert Del Fabbro v Wilckens & Burnside make it clear that the Act creates a statutory charge which entitles the worker to a lien or charge and gives the worker security for that lien or statutory charge.
In those circumstances, it appears to me that a lien holder is entitled to claim as a charge against the property and as against the moneys realised on the property as if the lien holder was a secured creditor. In my opinion, therefore, the lien holders in this case are entitled to the proceeds of the money from the proceeds of the sale upon which their liens were registered.
[31] Ibid at 120
The decision of Lander J appears to be per incuriam. In the earlier decision, Re RGP Constructions,[32] which was apparently not drawn to his Honour’s attention, the Full Court also had regard to the decisions in Stapleton and Albert Del Fabbro but reached the opposite view. The Court held that payments made to discharge a person’s indebtedness under a lien constituted undue preferences for the purposes of s 293 of the Companies Act 1962 (SA). The decision of the Full Court is binding. In the result ADX was not a secured creditor in respect of the moneys held by the Registrar General on account of the lien.
[32] above n 2
The unfair preference provisions, however, would not apply to a payment received by ADX from the Registrar General or from Martin Towers for that matter. In my opinion, such a payment would not amount to a “transaction” to which AFPL was a party as required by s 9. It is true, as Mr Jenner submitted, that a payment from a third party and not the company might satisfy the requirements of s 588 FA (1)(a). However, there must be some conduct on the part of the company that enables the relevant payment to be characterised as part of a transaction involving the giving of a preferential payment by the company to the creditor.
In the leading case Re Emanuel (No 14) Pty Ltd (In Liq); Macks and another v Blacklaw & Shadforth Pty Ltd the facts in issue were that a company (A) contracted with a third party (B) that in settlement of all claims between them, B would make payments both for, and at A’s direction to A’s creditor (C). A Full Court of the Federal Court held that both A and C were parties to a transaction which fell within s 588 FA (1) though neither was a party to all the component elements of the transaction.
The Court said:[33]
[W]e do not see the language of s 9 (which exemplifies but does not define transaction) as precluding a finding of a transaction to which the debtor A is a party merely because that transaction itself is made up of a composite of dealings in not all of which A participates.
It is not necessary for the purpose of this appeal to determine in any exhaustive fashion when a composite of dealings can together be said to constitute a s 9 transaction notwithstanding that not all of its component parts considered in isolation could rightly be said individually to be transactions.
While s 9 does not define “transaction”, it does through the process of exemplification typify the forms of conduct or dealing engaged in by a company that will be characterised as a transaction for its purposes … Common to the examples is the characteristic that the conduct or dealing engaged in by the debtor company has the consequence of effecting a change in the rights, liabilities or property of the company itself.
We confine our observations for present purposes simply to a course of dealing initiated by a debtor for the purposes of, and having the effect of, extinguishing a debt. It is not apparent to us why it should not be said that, where a debtor so acts and extinguishes a debt, the relevant ‘transaction’ is the totality of the dealings through which the debtor procures the intended outcome, irrespective of whether one or more of the dealings in the sequence in question does not involve or require the participation of the debtor but does require that of a third party. The transaction, in other words, is the totality of the dealings initiated by the debtor so as to achieve the intended purpose of extinguishing the debt.
…
We conclude, then, that a course of dealing initiated by a debtor that is intended to, and does, extinguish a creditor’s debt can in its totality be a transaction for the purposes of Pt 5.7B of the Corporations Law notwithstanding that the achievement of that end can only be realised through the participation of a third party in a particular dealing (or dealings) within the overall transaction, being a particular dealing (or dealings) to which the debtor is not or may not be a party.
(emphasis added)
[33] Ibid at 288-289
It is clear that a transaction may, for the purposes of Part 5.7B, comprise a series of dealings and that a person need not be a party throughout the entire transaction. However, as the court observed in Re Emanuel common to the examples of transactions contained in s 9 is the characteristic that “the conduct or dealing engaged in by the debtor company has the consequence of effecting a change in the rights, liabilities or property of the company itself”. The need for there to be some such conduct on the part of a debtor company has been emphasised in several cases.
In Macquarie Health Corp Ltd and Others v Commissioner of Taxation[34] four companies (the Debtors) were indebted to another company in liquidation (the Taxpayer). The Commissioner of Taxation issued to the Debtors notices under s 218 of the Income Tax Assessment Act 1936 (Cth) (ITAA) which permits the Commissioner to require any person by whom any money is due to a taxpayer to pay the amount due by the taxpayer in respect of tax. The Taxpayer’s liquidator contended, inter alia, that the first two notices were voidable pursuant to s 588 FE (4) as insolvent transactions of the Taxpayer.
[34] (1999) 96 FCR 238
A Full Court of the Federal Court rejected the liquidator’s argument for the following reasons:
It will be apparent that the reasons of Re Emanuel are different to those of the present case.
First, in Re Emanuel, the debtor initiated a course of dealing for the purpose of and having the effect of extinguishing a debt due to a creditor. In this case, the Taxpayer did not initiate any relevant course of dealing. The s 218 notices were served by the Commissioner upon the Debtors without the consent (or so it can be readily inferred) knowledge of the Taxpayer. As the primary judge found, the Taxpayer was in no sense a party to any of the s 218 notices or the service of those notices on the Debtors.
Secondly, in Re Emanuel, the debtor (A) intended to procure the outcome that the creditor’s debt would be discharged by the payment made by a third party (B). In the present case, the Taxpayer had no such intention so far as its debt to the Commissioner was concerned.
Thirdly, in Re Emanuel, the debtor (A) authorised the payment by another party (B) to a creditor (C) in order to discharge A’s debt to C. In this case, the Taxpayer did not authorise the Debtors to pay the debts to the Taxpayer. The recipients of the notices, if they had made payments required by the notices, would have been deemed by s 218 (4) of the ITAA to have acted under the authority of the ITAA. But s 218 (4) does not alter the fact that the Taxpayer never authorised the Debtors to make any payments to the Commissioner. On the contrary, s 218 (4) of the ITAA is a statutory deeming provision, designed to the Debtors against the absence of authority from the Taxpayer.
As the Court pointed out in Re Emanuel, s 9 does not define the expression “transaction”. It proceeds by a process of exemplification. The Court identified the common feature of the examples as being that the conduct or dealing engaged in by the debtor has the consequence of effecting a change in the rights, liabilities or property of the company itself. This is seen in par (b) which refers to “a charge created by the [company] on property of the [company]”. To this must be added the requirement in s 588FA (1) that a transaction is an unfair preference if and only if the company and the creditor are parties to the transaction.
In our view, neither the service of the s 218 notices by the Commissioner nor any payments by the Debtors pursuant to the notices could constitute a ‘transaction of the company” within s 588FE (4) … a fortiori, the Taxpayer and the Commissioner were not both parties to any relevant transaction. The Taxpayer itself did not engage in any conduct that had the effect of changing its rights, liabilities or property. The only relevant conduct was engaged in by the Commissioner and, if regard is had to any payment pursuant to the notices, by the Debtors.
See also Re Imobridge Pty Ltd (in liq),[35] Woodgate v Network Associates International BV[36] and Prentice v St George Bank Ltd.[37]
[35] [2000] 2 Qd R 280
[36] [2007] NSWSC 1260
[37] [2002] NSWSC 358
The grounds upon which the court distinguished Re Emanuel in Macquarie Health Corp Ltd are relevant to the present case. AFPL did not direct authorise or any other way arrange for ADX to be paid by the Registrar General or by Martin Towers for that matter. Nor has it intended to procure the outcome that its debt would be extinguished by payment to ADX. In short, it has not engaged in any form of conduct or dealing that would have the consequence of effecting a change in respect of its rights, liabilities or property. In my view there is no substance in the “preferential payment argument”.
There was always another problem with both the “no rights argument” and the “preferential payment argument”. As earlier mentioned it was submitted that AFPL and the Liquidators had an interest in presenting the “no rights argument” because, if it was successful, the moneys held by the Registrar General would flow back to AFPL via Martin Towers and Hindmarsh. Similarly, the “preferential payment argument” hinged on Martin Towers having to account to Hindmarsh and Hindmarsh having to account to AFPL for moneys that would then be available for distribution to the company’s creditors. Both arguments assume that AFPL had a valid claim against Hindmarsh and that Hindmarsh had a valid claim against Martin Towers. There is no foundation for the latter assumption. Indeed, Hindmarsh’s action against Martin Towers was dismissed pursuant to consent orders made on 21 February 2007. In those circumstances the moneys held by the Registrar General could never have trickled back to AFPL via Martin Towers and Hindmarsh.
There is a further reason for concluding that AFPL had no legitimate interest in the application for consent orders. There is no dispute that ADX and Martin Towers entered into a deed of compromise prior to the filing of the application for a hearing to obtain consent orders. In those circumstances the compromise in my view superseded ADX’s original cause of action against Martin Towers.
In Harvey v Phillips[38] the plaintiff sought to have a consent judgment set aside on the ground that she did not consent to settlement of her claim. The High Court rejected her appeal against a refusal by the Full Court (NSW) to set aside the judgment. The court said:[39]
But in the case of a compromise which is made within the actual as well as ostensible authority of counsel a court does not appear to possess a discretion to rescind it or set it aside. The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like.
[38] (1956) 95 CLR 235
[39] Ibid at 243
In the present case ADX and Martin Towers reached a compromise upon which Martin Towers filed with the consent of ADX an application for consent orders. The court had no basis upon which it could have properly resisted the application.
The principle expressed in Harvey v Phillips was applied by Prior J in Zollo v Marona[40] where his Honour held that an intervention should not be permitted after a compromise of the action between the parties had been recorded by the court. In that case the plaintiff Zollo sued the defendants in the Magistrates Court in respect of a debt acknowledged by them to be due to him. Before the action came on for trial a compromise was reached between the parties, with the defendants agreeing to judgment being entered against them with a denial of liability in the sum of $10,000. Counsel attended court on the day set down for trial and handed up to the court minutes of order for consent judgment in accordance with the compromise reached by the parties. The magistrate was then asked by the liquidator of a company, of which the plaintiff was a director, for leave to intervene on the basis that the liquidator had an interest in the outcome of the proceedings. Prior J allowed an appeal against an order granting leave to intervene. After referring to the decision in Harvey v Phillips Prior J said:
The effect of the compromise being announced between the original parties to the action was that the original cause of action was superseded altogether: Green v Rozen (1955) 2 All ER 797 at 801. See too Darling Downs v Elwood (1988) 80 ALR 203 at 216.The compromise took effect before any application to intervene was made on 11 April 1994. The intervention therefore had to be refused. Any matter remaining before the court was the compromise, not the original cause. An intervener cannot raise issues different from those between the parties. An intervener cannot change the issues as between the parties in the action. The application to intervene could only relate to any extant cause as at the time of intervention. The compromise had to be distinguished from any claim the liquidator might have had against the plaintiff. It could not be pursued by intervention. Separate proceedings must be pursued: See Hocking v Southern Greyhound Racing (1993) 61 SASR 213 at 216, 220 and 221.
[40] (Jud No s4767, 30 September 1994, unreported)
There are differences between the circumstances in Zollo and those in the present case. But in my view they are not of a material nature. In Zollo, the liquidators sought to intervene after the parties reached a compromise and handed up minutes of order but before the orders sought were made. Here, the Liquidators sought to intervene after ADX and Martin Towers reached a compromise, and the application for consent orders was filed, but before the application was granted. In my opinion, the decision in Zollo indicates that if the Liquidators in the present case had a proper interest in the payment of moneys to ADX (which I do not believe they had for the reasons I have expressed) they were obliged to pursue separate proceedings to recover any moneys payable to AFPL. That objective could not be pursued in the context of the compromise reached between ADX and Martin Towers.
I turn to the individual grounds of appeal.
Ground 1
This ground of appeal complains that the Master erred in allowing ADX and Martin Towers to proceed with their applications for costs against the Liquidators when they had failed to place before the court the Deed of Compromise, which allegedly obligated ADX to discontinue its action against Martin Towers.
I fail to see how the terms upon which ADX settled it’s action against Martin Towers could, in any way be relevant, to the costs applications. The court retained its jurisdiction to hear the applications for costs, notwithstanding discontinuance of the action.[41] The Master was entitled to hear the costs applications, based on the conduct of the Liquidators, regardless of who was responsible for the discontinuance. In any event AFPL did not object to the application for costs proceeding in the absence of the deed. Finally, it should be observed that on the hearing of this appeal no written or oral submissions were put to me by the appellants in support of this ground of appeal. In my view, the ground has no substance.
[41] District Court Act 1991, s 42 (1); DCR 52.03; Blackjack Executive Car Services Pty Ltd v Koulax [2002] VSC 380 at [11]
Grounds 2 and 3
These two grounds are linked and can be dealt with together.
Ground 2 asserts that the Master erred as a matter of law in finding that AFPL had no right of appearance by reason of s 471(B) of the Corporations Act, while ground 3 complains that the Master erred as a matter of law in finding that AFPL could only have appeared at any hearing of the application for consent orders if it had applied to intervene under DCR 33.01 (1987 Rules). In relation to each of these two grounds it is said that the Master fell into error because (a) the matter was not argued and (b) neither ADX nor Martin Towers opposed the appearance of AFPL at the hearing on 28 November 2007 when the consent orders were made.
The contention that these matters were never argued before the Master is simply wrong. They were the subject of written submissions filed on behalf of ADX on 28 November 2007 and 22 January 2008, as recounted by the Master in his reasons for decision.[42] As I earlier remarked it was contemplated that the application for costs would proceed on the papers and the written submissions filed by the parties and non-parties. AFPL and the Liquidators had been put on notice that ADX was pressing this point. AFPL and the Liquidators may not have chosen to argue the matter but that was a matter for them.
[42] Master’s Reasons [78]
There is also no substance in the point that ADX and Martin Towers did not oppose the appearance of AFPL at the hearing on 28 November 2007. On the day of the hearing AFPL withdrew its opposition to the orders sought. There was no point in either ADX or Martin Towers expressing any opposition in that regard. As Dr Bleby submitted “it would be nonsensical for those parties to have argued against the ability of the defendant to communicate to the court that it was withdrawing its opposition”.
But was the Master correct in finding that AFPL had no “automatic right of appearance” because it was by virtue of s 471B “no longer an active party” and in those circumstances should have formally applied to intervene in the application for consent orders?
Section 471B relevantly provides that while a company is being wound up in insolvency a person cannot begin or proceed with a proceeding against the company except with leave of the Court and in accordance with such terms (if any) as the Court imposes. Proceedings stayed by virtue of s 471B remain technically in being, albeit in a dormant form. The proceedings cannot proceed or resume its active life without leave of the Court.[43]
[43] see ROFA Sport AG v DHL International Ltd [1989] 2 ALL ER 743 at 748-749 per Neill LJ for discussion of the effect of a stay
DCR 33.01 states:
Any person:
(a) claiming an interest in the subject matter of proceedings; or
(b)whose claim or defence raises a question of law or fact, in common with the subject proceedings or the decision of which might affect the proceedings; or
(c)claiming that his participation in the proceedings will provide the Court with information relevant to the decision of the case or the choice of a remedy that will not be presented by an existing party,
may by application to the Court in the proceedings seek:
(i) permission to intervene; and
(ii) directions.
In Lunn Civil Procedure South Australia (1987 Rules) the commentary in relation to Rule 33.01 states:[44]
The precise status and rights of an intervener under the rules applying to interveners is unclear. The inference from R 33.06 (a) is that he is not a party to the action in the sense of being a plaintiff, a defendant or subsequent third party: Re North Flinders Mines Ltd: Paringa Mining & Exploration Co plc v North Flinders Mines Ltd (SC (SA), Legoe J, Jud No 1163, 25 November 1988, unreported, BC 8800150.
[44] Lunn pg 8135 [R 33.00.5]
In the present case ADX brought an action that comprised two alternative claims; the first against AFPL and the second against Martin Towers. The first claim was dormant by operation of s 471B the second was not. I do not believe that the Master was necessarily wrong in concluding that R33.01 was applicable in these circumstances. The company, as first defendant, was a party to the action but it was a non-party to the only active claim. In relation to the active claim AFPL was, using the language of r 33.01, a “person … claiming an interest in the subject matter of proceedings” between ADX and Martin Towers.
But even if this view is wrong, it cannot be said that Master’s discretion in respect of the costs orders miscarried. The fact of the matter is that despite the Master’s opinion that AFPL should have filed an application to intervene under r 33.01 he, nevertheless, gave AFPL an opportunity to be heard. It is true that, for the purposes of assessing the reasonableness of AFPL’s overall conduct, the Master may have taken into account AFPL’s alleged failure to comply with the rule. But on any view of the matter this was a minor aspect of the history of the proceedings. The significant features of that history were that AFPL expressly opposed the application for consent orders on grounds that were manifestly hopeless. Furthermore, they had been put on notice that ADX and Martin Towers would ask for costs to be warded against the Liquidators because their opposition was unmeritorious. In my view, for reasons that I will elaborate upon later, the Master was entitled to rely upon those matters as factors justifying the orders he made.
Ground 4
This ground asserts that the Master erred in taking into account in the exercise of his discretion the likely outcome of AFPL’s “foreshadowed argument opposing the consent orders” when (a) the matter was not argued and (b) the consent orders were made with a reservation of AFPL’s rights.
There is no substance in this complaint. For the purposes of determining whether cost orders should be made against the Liquidators personally it was relevant for the Master to consider whether AFPL ever had a legitimate interest in seeking to oppose the application for consent orders especially in circumstances where AFPL withdrew its opposition without explanation to the court. As earlier observed, the factors upon which a court may appropriately order costs to be paid on an indemnity basis include the making of allegations or contentions that are groundless.
The suggestion that AFPL never had an opportunity to put forward its argument must be rejected. The grounds upon which AFPL contended that it had an interest in the application were set out in its outline of submissions filed on, or about, 22 November 2007. As I earlier pointed out it asserted that ADX had no rights under the Act and that payment to AFPL would elevate it to the position of a secured creditor to the detriment of other unsecured creditors. On 28 November 2007 it consented to the application but purported to reserve its rights in relation to the preference claim argument.
Subsequently ADX and Martin Towers filed written submissions asserting that a factor justifying costs orders against the Liquidators was AFPL’s hopeless opposition to the application. After AFPL received those submissions it filed an outline of written submissions asserting that it had an interest in the moneys deposited with the Registrar General due to the Supreme Court action. The matter then came back on for oral argument on 7 April 2007.
AFPL and the Liquidators had ample opportunity to justify their opposition to the application for consent orders knowing that ADX and Martin Towers were contending that the company and its liquidators had no proper interest in the matter. The onus was on AFPL and the Liquidators to justify the stance they had taken. If their arguments were not as expansive as they would have liked they have only themselves to blame. But more than that I have now heard the arguments which they say justified their opposition to the consent orders. As I have already indicated those arguments lack merit.
Ground 5
This ground attacks the Master’s remarks at [122] of his Reasons where he said:
The first defendant was not a party to this compromise, but it had chosen to intervene. It had expressly indicated that the proposed order was opposed, in contrast to contending that it wanted time to consider its position.
It is said that the Master erred in finding that AFPL “had chosen to intervene” when the Notice for Specific Directions had been served on AFPL and Martin Towers had sought AFPL’s consent to the orders sought.
I do not accept this argument. As Mr Munt submitted, the Master’s remarks must be read and understood in the context of that paragraph, in particular the final sentence of the paragraph. The Master was not taking issue with AFPL appearing on the application for consent orders but rather with it expressly opposing the consent orders. Indeed, as I earlier emphasised, he clearly gave AFPL an opportunity to be heard. The use of the word “intervene” by the Master was a reference to AFPL seeking to intervene in the settlement. This is consistent with the language used in the written submissions filed on behalf of ADX filed on 21 January 2008.[45]
[45] see Appeal Book 133-144 [18] [34]-[36]
Ground 6
The appellants contend that the Master failed to have any proper regard to the history of the matter from 19 November 2007 to 28 November 2007 and should have found that the Liquidators had acted reasonably.
In support of that contention Mr Jenner argued that the Master:
1. failed to have sufficient regard to the contents of Mr Macks’ affidavit;
2. failed to appreciate the significance of AFPL not having received the amended pleadings of ADX until 26 November 2007 the pleadings having been amended on 11 July 2007; and
3. failed to attach sufficient weight, to the conduct of ADX and Martin Towers in failing to oppose the appearance of AFPL at the hearing of the application for consent orders on 22 November 2007 and in subsequently allowing the Master to note, when making the consent orders on 28 November 2007, AFPL’s reservation of rights in relation to the preferential payment claim.
In relation to the first issue Mr Jenner emphasised that Mr Macks deposed that following his return from New Zealand, on 19 November 2007, he was not in a position to consider the application for consent orders before 22 November 2007 when the matter had been set down for hearing. Mr Macks also stated that he needed more time to consider the matter in consultation with his barrister and that it was not possible to consult him until 27 November 2007.
The difficulty with this explanation is that it amounts to a concession that opposition was expressed in circumstances where the Liquidator had not properly considered the matter. If Mr Macks wanted more time the appropriate course was to ask the Master for an adjournment when the matter came on for hearing on 22 November 2007. Instead, AFPL expressed unqualified opposition to the application and the matter was adjourned for argument. It should also be observed that AFPL had been claiming that it had an interest in ADX’s claim against Martin Towers since about March 2007. I find it difficult to accept that the Liquidators would not have had sufficient time to consider the merits of that claim during the months leading up to the hearing.
In relation to the second point Mr Jenner contended that it was not until 26 November that AFPL fully understood the nature of the issues joined between ADX and Martin Towers. He submitted that the amendment contained allegations that were “not known to the Liquidators before they were served with the amended pleadings”. He further complained that ADX had failed to serve the amended pleadings within the time frame stipulated in the Rules of Court. Mr Munt took issue with the suggestion that AFPL was “served” with the amended pleadings and pointed out that the amended pleadings were provided to AFPL at the request of AFPL’s solicitors. He submitted that there was no obligation on ADX to serve AFPL in accordance with the Rules because it was no longer an active party to the action.
In my view, there is no need to resolve this issue because it is manifestly clear from an examination of the pleadings that the amendment did not alter the nature of ADX’s claim against Martin Towers. From beginning to end the claim was based on the lien. The amendment consisted of mere refinements to a pleaded cause of action.[46] It should also be observed that Mr Macks did not suggest in his affidavit that the amended pleadings had any bearing on the decision to consent to the application for consent orders. Indeed his affidavit does not mention the amended pleadings at all. The reliance on the amended pleadings as a basis for justifying AFPL’s opposition to the application for consent orders is without merit.
[46] see Amended Statement of Claim AB 1-7 [19]-[24.5]
In relation to ADX and Martin Towers not objecting to AFPL’s appearance on 22 November 2007 there is, as I have already observed, no substance in this point. There is no need to repeat what I have said on this topic.
In respect of the “reservation of rights” point, Mr Jenner argued that the willingness of ADX and Martin Towers to allow the Master to note this reservation meant that the stance taken by the Liquidators, through their solicitors on 27 November 2007, was reflected in the orders the Master made the following day. In those circumstances the conduct of the Liquidators could not be categorised as unreasonable. The implication of this argument is that ADX and Martin Towers consented to orders reserving AFPL’s rights and that the recording of the reservation by the Master indicated approval of AFPL’s stance.
There are two points to be made about that submission.
·First, AFPL’s reservation of rights was not reflected in the orders made by the Master. He made the orders sought by Martin Towers and merely noted AFPL’s reservation of rights in the transcript of the hearing.
·Second, there is no foundation for the suggestion that ADX and Martin Towers agreed, in any shape or form, to the stance taken by AFPL. Indeed, David Deakin Davies advised Ezra Legal by letter faxed on the morning of 28 November (the hearing was in the afternoon) that AFPL’s proposal for conditional consent orders was unacceptable. On the hearing of the application ADX and Martin Towers obtained the orders they wanted. There was nothing more they needed to do. Clearly, there was no point in either of them arguing, at that time, that there was no substance in the arguments AFPL wanted to reserve.
In relation to the history of the proceedings there was a further point made by Mr Jenner. He complained that the Master erred in taking into account the letter from David Deakin Davies to Ezra Legal (attached to the affidavit of Ms McAuliffe) in which it was asserted that Mr Davies had informed Mr Jenner after the hearing on 22 November 2007 that his client would be seeking costs orders against Mr Macks personally.
Mr Jenner submitted that the letter was irrelevant because it was sent after 28 November 2007, the day on which the Master made the consent orders. I reject this argument. In my view the letter was relevant. True it was sent after 28 November but it related to events that had taken place before then. The assertions made in the letter by Mr Davies were never disputed. The fact that Mr Jenner had been informed of Martin Towers’ attitude in relation to the costs orders was relevant to an evaluation of the reasonableness of the conduct of AFPL and the Liquidators, in continuing to oppose the consent orders.
In summary I reject the abovementioned criticisms of the Master’s reasons. I am satisfied that he had full and proper regard to the relevant events.
Grounds 7 and 8
These grounds put in issue whether an order for costs should have been made against the Liquidators at all, and if so, whether it should have been on an indemnity basis.
In essence Mr Jenner submitted that in addition to the history of the proceedings the Master failed to have any regard, or any sufficient regard, to the special position of a liquidator. I do not accept that criticism. There is nothing in the Master’s reasons to indicate that he did not have proper regard to Mr Macks’ role. On the contrary the Master specifically referred to the affidavit of Mr Macks, to his position as a liquidator and to the authorities which emphasise that it was a factor to be considered.[47]
[47] see Master’s Reasons [93]-[96], [104], [106]-[112], [125], [126]
Mr Jenner’s further contention that the Master failed to place sufficient weight on the fact that the Liquidators had acted in good faith in discharging their duties must also be rejected. The Master appears to have accepted that there had been no misconduct or misfeasance on the part of the Liquidators. However he correctly pointed out that such behaviour is not a pre-condition to the making of costs orders against Liquidators personally: see Health & Life Care Ltd v SA Asset Management Corp, discussed herein at [59].
Notwithstanding the special position held by the Liquidators and the policy consideration that liquidators should not be discouraged from taking court proceedings because of the risk of having to pay costs personally, I do not think that it can be said that the Master demonstrably erred in the exercise of his discretion.
1There was no relief sought by ADX against AFPL by reason of it being in liquidation and the claims against it being stayed by operation of s 471B.
2The active parties ADX and Martin Towers reached a compromise to resolve the issues between them.
3AFPL sought to intervene and oppose the application for consent orders on grounds which were and which it ought to have known were hopeless.
4The orders were opposed against the background of ADX and Martin Towers having warned the Liquidators that they would seek costs orders against them personally.
5The withdrawal of the stated opposition was made on the day set aside for argument without any explanation by AFPL.
On any view of the matter, the Liquidators caused opposition to be made to the orders, which opposition continued all the way to the commencement of the hearing, on hopeless grounds.
Conclusion
The appeal is dismissed. I will hear the parties as to costs.
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