Australian Securities Commission v Aust-Home Investments Ltd (ACN 0011061000)

[1993] FCA 651

6.5 l q3

f JUDGMENT NO. ao,o..,emooomoaooI m*.-

IN THE FEDERAL COURT OF AUSTRALIA	) )
QUEENSLAND DISTRICT REGISTRY	) No QG 3004 of 1990
GENERAL DIVISION

BETWEEN:  AUSTRALIAN SECURITIES COMMISSION
Applicant

AND	'
_.	AUST-HOME INVESTMENTS LTD (ACN
0011061000~ & ORS
Respondent

CO- :  HILL J RECEIVED

PLACE	:	BRISBANE	2 0 SEP 1993
DATED	:	17 SEPTEMBER 1993	FEDERAL COURT OF

AUSTRALIA PRINCIPAL

REASONS FOR JUDGMENT

On 16 March 1993, a notice of motion was brought (I shall say more as to the parties to that motion later) for a declaration, inter alia, that an unregistered mortgage dated 1 June 1989 between Berona Holdings Pty Ltd, as mortgagor, and Connie Borg and David Alan Fischer, as mortgagees, was invalid. That declaration was sought in the context of orders also sought empowering the receivers and managers of Berona Investments Pty Ltd and Berona Holdings Pty Ltd to sell properties stipulated in the notice of motion. More or less simultaneously, an application was made to restrain the receivers from proceeding with sales of property in respect of which they had been

not then been able to obtain instructions. The notice of motion

had been served on the solicitors for Connie Borg the day before.

Cooper J adjourned the notlce of motion until 23 April 1993, having given a judgment on 19 March 1993 in which his Honour indicated, inter alia, that the receivers were not to sell the properties in question and having made a declaration to that effect.

On 23 April 1993, the prime matter of concern to his Honour was the resolution of the receivership of the more than 50 respondents to proceedings number QG3004 of 1992. Hence, on that day, his Honour ordered the cessation of the receiverships originally ordered by Northrop J on 18 March 1992 and, in respect of most of the respondents, made orders that there be no orders as to costs. His Honour did not directly deal with the costs of the motion to which Connie Borg was a party, except so far as his Honour directed that the issue of costs of that motion would be dealt with on 26 August. On the day prior to these orders being made, the receivers advised the representatives of Connie Borg that they would not proceed with the motion against her. She

was, however, represented by counsel before Cooper J on 23 April

1993.

I am now asked to determine by whom the costs of that motion should be paid. The applicants to the motion were, so far as is presently relevant, named as Berona Holdings Pty Ltd and Berona Investments Pty Ltd. In each case the notice indicated that receivers had been appointed to the companies. That was not so. All that had happened was that receivers had been appointed to the assets of the companies. That appointment conferred no power upon the receivers to commence proceedings in the name of the companies and the companies themselves remained under the control of their respective boards of directors. Counsel who appeared before me indicated that he appeared for the receivers and not for the companies. In fact the companies, it may be assumed, were opposed to the proceedings being brought, or at the least it can be said that the notice of motion was brought without the authority of a resolution of the board of directors of either company.

Accordinglythe present application for costs is really an application by MS Borg for costs against the receivers who were never parties to the litigation.

Counsel for MS Borg in the course of argument said that
there was nothing he could say as regards the costs of the first
day, that is to say, the costs of 18 March 1993. However, it was

into account evidence directed at the question whether it was submitted that, in deciding the matter of costs I should take

reasonable for the motion to be brought against MS Borg. In so doing, counsel no doubt relied upon what had been said by Pincus

J in South East Oueensland Electricitv Board v Australian

Telecommunications Commission (unreported Pincus J, 10 February

1989) and the other cases whlch are referred to in my judgment

in the main proceedings concerning Mr and Mrs Bunt (Australian
Securities Commission v Aust-Home Investments Ltd & Ors,
unreported, 26 August 1993).

As I said in that judgment, the question whether it is reasonable to bring proceedings may have relevance when the parties agree that the proceedings have become academic and a question arises as to how the costs of those proceedings are to be borne. The question, of course, is but one of the factors that would enter into the judicial discretion to determine how costs are to be borne.

The present case differs from that of Mr and Mrs Bunt because, in their case, they had, through their legal representatives, consented to orders being made against them, so that there was a stronger case for their bearing at least some of the costs payable in the proceedings brought against them by the Australian Securities Commission. The present, however, was not such a case.

Before dealing with the manner in which I propose to exercise the discretion, I should say something of the facts relied upon by the receivers as supporting the proposition that there was a reasonable case for proceedings to be commenced.

A Mrs Bell-Bradbury had apparently been examined by Mr Behan on behalf of the Australian Securities Commission. It is conceded by counsel for MS Borg that, during the course of this

examination, Mrs Bell-Bradbury made three somewhat damaging admissions, if the issue of the validity of the mortgage of MS Borg were to fall for consideration.

Mrs Bell-Bradbury admitted that she had, on occasions, signedMs Borg's name. More significantly, however, she admitted that she had signed MS Borg's name on the mortgage. She also admitted that there was no such person as Mr Fischer.

When one comes to examlne the mortgage in question, one sees that the mortgagees are stated to be Connie Borg and David Alan Fischer. These admissions, if ultimately shown to be correct, would no doubt form a substantial case for showing that the mortgage given by Berona Holdings Pty Llmited was not a valid mortgage.

If, therefore, it was appropriate for the receivers to
litigate that issue, it would have to be said that there was

was invalld. substantial reason for their taking the view that the mortgage

However, the present proceedings were brought not because there was some separate dispute which had arisen between the receivers and MS Borg, but as part of proceedings directed at the sale of the property of the companies in respect of whose assets the receivers had been appointed. Those proceedings were, as Cooper J sald in his judgment, misconceived. In those

circumstances it seems to me that the ordinary rule as to costs should prevail, namely, that if proceedings are brought against a party and thereafter discontinued, that discontinuance should result in an order for costs being made against the party commencing the proceedings.

The fact that there was reason to believe that the mortgage was not valid did not, in the circumstances, it seems to me, justify the commencement of proceedings against MS Borg so as to enable those properties to be sold. And there is little doubt that that was the purpose of the proceedings brought.

However, the present application is, as I have already observed, an application for costs against the receivers personally and in circumstances where they had caused proceedings to be commenced in the name of parties without authority. That raises the question whether the costs should be ordered against them personally, and if so whether such costs should be ordered

on an indemnity basis, or on the usual party and party basis.

There is no doubt that the Court has power to order costs against a third party to the litigation. That power stems from s.43 of the Federal Court of Australia Act 1976, c£ Knight v FP Special Assets Ltd (1992) 174 CLR 178. The matters to be taken into account in ordering costs to be paid by such a third party will, of necessity, differ from those relevant to determiningthe costs as between the parties. It will obviously, for example, be relevant that the third party has caused proceedings to be commenced wlthout the authority of the nominal moving party. It will also be relevant that the proceedings, if properly brought, were misconceived.

It is no answer to say, as the receiver has done, that there was merely a "procedural irregularity". To cause proceedings to be brought in the name of a party without authority goes beyond a mere procedural irregularity. However, counsel for MS Borg conceded, in his written submissions, that the representatives of MS Borg always understood that the motion was brought by the receivers and properly points to material in support of the notice of motion as specifying that it was the receivers and managers who sought orders in this matter. He places reliance merely on the submission that in bringing the proceedings the receivers were acting outside of their appointment.

In these circumstances I have no hesitation in ordering the receivers to pay the costs of MS Borg (I see no reason to exclude the costs of 18 March 1993) but I refrain from ordering those costs to be paid on an indemnity basis. Instead I order the receivers to pay MS Borg's costs on a party and party basis.

I certify that this and the
preceding six (6) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Mr Justice Hill.

Associate:  7'- C (&d?ab

Date: 17 September 1993

Counsel and Solicitors	Mr P.J. Favell instructed by
for Applicant:	Masinello & Associates
Counsel and Solicltors	Mr D.K. Smith instructed by
for Respondent:	Halletts
Date of Hearing:	26 August 1993
Date Judgment Delivered:	17 September 1993

appointed under s.1323 of the Cor~orations

Law.

The notice of motion came before Cooper J on 18 March
1993. On that day Connie Borg was represented by counsel who had