Aevum Limited ACN 087 648 691 v National Exchange Pty Limited
[2005] FCA 368
•4 MARCH 2005
FEDERAL COURT OF AUSTRALIA
Aevum Limited ACN 087 648 691 v National Exchange Pty Limited
ACN 006 079 974 [2005] FCA 368AEVUM LIMITED ACN 087 648 691 v NATIONAL EXCHANGE PTY LIMITED ACN 006 079 974
NSD1592 OF 2004
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v NATIONAL EXCHANGE PTY LIMITED ACN 006 079 974
NSD1679 OF 2004
EMMETT J
4 MARCH 2005
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1592 OF 2004
IN THE MATTER OF AEVUM LIMITED ACN 087 648 691
BETWEEN:
AEVUM LIMITED ACN 087 648 691
FIRST PLAINTIFFALLEN KAVANAGH
SECOND PLAINTIFFAND:
NATIONAL EXCHANGE PTY LIMITED ACN 006 079 974
DEFENDANT
JUDGE:
EMMETT J
DATE:
4 MARCH 2005
PLACE:
SYDNEY
THE COURT ORDERS THAT:
1. The Defendant is to pay 25% of the Plaintiff’s costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1679 OF 2004
BETWEEN:
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
PLAINTIFFAND:
NATIONAL EXCHANGE PTY LIMITED ACN 006 079 974
DEFENDANTJUDGE:
EMMETT J
DATE:
4 MARCH 2005
PLACE:
SYDNEY
THE COURT ORDERS THAT:
1.The Defendant is to pay the costs of the Plaintiff, other than the costs that would not have been incurred but for the claims in relation to misleading and deceptive conduct and unconscionable conduct.
2.The Plaintiff is to pay the costs of the Defendant that would not have been incurred but for the claims in relation to misleading and deceptive conduct and unconscionable conduct.
3. All other orders as to costs previously made are to stand.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD1592 OF 2004
IN THE MATTER OF AEVUM LIMITED ACN 087 648 691
BETWEEN:
AEVUM LIMITED ACN 087 648 691
FIRST PLAINTIFF
ALLEN KAVANAGH
SECOND PLAINTIFFAND:
NATIONAL EXCHANGE PTY LIMITED ACN 006 079 974
DEFENDANTNSD1679 OF 2004
BETWEEN:
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
PLAINTIFFAND:
NATIONAL EXCHANGE PTY LIMITED ACN 006 079 974
DEFENDANTJUDGE:
EMMETT J
DATE:
4 MARCH 2005
PLACE:
SYDNEY
REASONS FOR CONCLUSIONS
These two proceedings involved substantially similar issues. On 23 December 2004, I published my conclusions in both matters and published my reasons for those conclusions. I directed the parties to bring in short minutes of order to reflect my conclusions and I subsequently made orders on 20 January 2005. At that time I directed the parties to make written submissions as to costs, which I have now received. I have also heard further oral argument on that question. In these reasons I shall adopt the same terms as I used in my reasons of 23 December 2004.
National Exchange is the defendant in both proceedings. Aevum commenced the first proceeding claiming declarations that National Exchange had contravened provisions of the Corporations Act 2001 (Cth) (‘the Act’) in relation to unsolicited offers made off market by National Exchange to purchase shares in Aevum. From an early stage National Exchange asserted that Aevum did not have standing to obtain the relief that it claimed. However, National Exchange also resisted the substantive claims made by Aevum, that the unsolicited offers to buy shares in Aevum did not comply with Division 5A of the Act. Aevum was substantially successful in persuading the court that the offers made by National Exchange did not comply with the requirements of Division 5A, although I ultimately concluded that Aevum did not have standing.
The Commission commenced the second proceeding when the hearing of the first proceeding was virtually completed. The Commission had been given ample opportunity to intervene before it commenced the second proceeding, but it did so only when I intimated, in the course of argument in the first proceeding, that I had considerable doubt as to whether Aevum had the standing to obtain the relief claimed in it by the first proceeding.
While the Commission raised virtually the same issues as had been raised by Aevum in the first proceeding concerning want of compliance with Division 5A of the Act, the Commission made additional allegations of unconscionable conduct and misleading and deceptive conduct on the part of National Exchange. The Commission failed in that aspect of its claims against National Exchange.
In the course of argument in the first proceeding, I intimated that I had formed the conclusion that there was a failure on the part of National Exchange to comply with Division 5A. One of the consequences under the Act of such failure was that persons who had entered into contracts with National Exchange to sell their shares in Aevum to National Exchange were entitled to refuse to transfer their shares.
Shortly after the commencement of the second proceeding, National Exchange submitted to an order in that proceeding requiring it to send, to all members of Aevum who had accepted offers from National Exchange, a letter indicating that the Court had concluded that National Exchange's offers failed to comply with the requirements of Division 5A, and informing those members of Aevum of their right to refuse to sell their shares to National Exchange.
While I concluded that Aevum did not have standing to obtain the relief claimed in the first proceeding, Aevum was substantially successful in relation to the substantive issues that were raised. Insofar as those same issues were raised in the second proceeding, the Commission was also substantially successful in relation to those issues. In one sense, the Commission did no more than reiterate the submissions made on behalf of Aevum, although the Commission did advance additional arguments in relation to one question that was of considerable assistance in the resolution of that question against National Exchange.
In the result, I concluded that the offer sent by National Exchange contravened, or failed to comply with, Division 5A in two respects. The first related to s 1019E(2), in that the offers were not sent to shareholders as soon as practicable after the date of offers. No additional arguments were advanced on behalf of the Commission in relation to that matter.
However, the Commission made further argument in relation to the failure to comply with s 1019G(2), in that the offers were not expressed to remain open for at least one month. National Exchange continued to resist the contentions advanced by the Commission in relation to that matter.
The second proceeding was significantly more complicated than the first proceeding, by reason of the additional claims made by the Commission that the conduct of National Exchange was unconscionable or was misleading and deceptive, in contravention of the Act and the Australian Securities and Investments Commission Act 2001 (Cth). National Exchange was successful in relation to those matters, which involved not insignificant evidentiary issues and questions.
The power to award costs is not fettered by any legislative presumption about the manner of its exercise. Further, the effect of s 43 of the Federal Court of Australia Act 1976 (Cth) is that the Court has an absolute and unfettered discretion to award, or not to award, costs as it considers appropriate. Nevertheless, the discretion must be exercised judicially. Generally, costs follow the event, or where a litigant succeeds on only part of the claim, or a successful party fails on some issues, it may be appropriate to require one party to bear the expense of litigating issues in respect of which that party failed.
The first proceeding was not commenced without justification. Aevum commenced the first proceeding in the exercise of a paternalistic interest on behalf of its shareholders. It is problematical as to whether, if the first proceeding had not been commenced, shareholders of Aevum would have been aware of the right, conferred upon them by Division 5A of the Act, to refuse to transfer their shares to National Exchange, notwithstanding that they had accepted its offers to buy their shares.
It was only after full argument and the intimation by the Court of its view that National Exchange had failed to comply with Division 5A, coupled with the commencement of the second proceeding by the Commission, that National Exchange submitted to an order requiring it to inform shareholders of their entitlement to refuse to transfer their shares.
I concluded that Aevum did not have standing to seek the relief claimed in relation to Division 5A. However, I accept that the first proceeding was instituted in the public interest in order to vindicate the rights of members of Aevum who, individually may not have known of the rights conferred upon them by Division 5A of the Act. The first proceeding was not brought for the personal or financial gain of Aevum and involved novel provisions of the Act.
National Exchange did not make any offer to submit to a remedial order in relation to its failure to comply with Division 5A until after the commencement of the second proceeding. The Commission could have simply commenced a proceeding raising substantially the same issues as had been raised in the first proceeding. However, the Commission raised significant further issues in the second proceeding.
On the other hand, the additional issues raised by the Commission were raised in the public interest and, as I have said, the Court was considerably assisted by additional argument advanced by the Commission in relation to the construction of s 1019G. Although I did not accept the contentions advanced by the Commission in relation to unconscionable conduct and misleading and deceptive conduct on the part of National Exchange, the contentions were not completely without substance. Nevertheless, that aspect did not involve any overlap with the first proceeding.
In the circumstances, I consider that it would be just and equitable to make the following orders:
- National Exchange pay 25 per cent of the costs of Aevum in the first proceedings,
- National Exchange pay the Commission’s costs of the second proceeding, other than costs that would not have been incurred but for the claims in relation to misleading and deceptive conduct and unconscionable conduct,
- The Commission pay National Exchange’s costs of the second proceeding that would not have been incurred, but for the claims in relation to misleading and deceptive conduct and unconscionable conduct.
I am mindful of the difficulties with orders such as I have proposed. I am also mindful of arbitrariness in the orders that I have proposed concerning Aevum. However, I consider, having regard to all of the circumstances and my recollection of the way in which the proceedings were conducted, that both orders would be just and equitable in the circumstances.
I make it clear that any orders as to costs that have already been made in either proceeding should stand.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 6 April 2005
FIRST PROCEEDING
Counsel for the Plaintiff: D Studdy Solicitor for the Plaintiff: Minter Ellison Counsel for the Defendant: L V Gyles Solicitor for the Defendant: Piper Alderman Dates of Hearing: 4 March 2005 Date of Judgment: 4 March 2005 SECOND PROCEEDING
Counsel for the Commission: J W Stevenson SC, SW Climpson Counsel for the Defendant: G C Lindsay SC, L V Gyles Solicitor for the Defendant: Piper Alderman Dates of Hearing: 4 March 2005 Date of Judgment: 4 March 2005
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