Beattie and Sutherland v Osman (No. 5)

[2009] NSWSC 923

CITATION:	Beattie & Sutherland v Osman (No. 5) [2009] NSWSC 923
HEARING DATE(S):	14/08/09
JUDGMENT DATE :	14 August 2009
JURISDICTION:	Equity
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	14 August 2009
DECISION:	Order pursuant to s 98 of the Civil Procedure Act that the plaintiff pay the defendants’ costs of the proceedings except that there be no order as to the costs of or incidental to the defendants’ notice of motion dated 7 August 2009.
CATCHWORDS:	Costs - no question of principle
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW)
CATEGORY:	Consequential orders
TEXTS CITED:	Ritchie, Uniform Civil Procedure NSW
PARTIES:	Graeme Robert Beattie and Roderick Mackay Sutherland in their capacity as joint and several administrators of PR Marketing & Media Group Pty Ltd (Administrators Appointed) v Rhonda Osman & 2 Ors (No. 5)
FILE NUMBER(S):	SC 3588/09
COUNSEL:	Plaintiff: C D Wood Defendant: B F Katekar
SOLICITORS:	Plaintiffs: Matthews Folbigg Defendants: Axis Legal

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

WHITE J

Friday, 14 August 2009

3588/09 Graeme Robert Beattie and Roderick Mackay Sutherland in their capacity as joint and several administrators of PR Marketing & Media Group Pty Ltd (Administrators Appointed) v Rhonda Osman & 2 Ors (No. 5)

JUDGMENT

1 HIS HONOUR: Two questions are agitated this morning. The first is what order should be made as to costs. The second is whether, as the defendants seek, I should make a declaration under s 447C of the Corporations Act 2001 (Cth) that the purported appointment on 24 June 2009 of the plaintiffs as administrators of the third defendant was not valid on the ground that the charge pursuant to which the purported appointment was made was not then enforceable.

2 I will deal with the question of costs first. The first and second defendants are the only defendants who have filed an appearance. Pursuant to r 42.1 of the Uniform Civil Procedure Rules 2005, costs follow the event, unless it appears to the Court that some other order should be made as to the whole or any part of the costs. Prima facie, as those defendants have been successful, they should have their costs of the proceedings. That position must be modified, at least in part, because it was necessary for the first and second defendants to file a notice of motion seeking leave to withdraw their submitting appearance.

3 That notice of motion was filed in court on the first day of the hearing, and I made an order granting that leave. The evidence in support of the application showed that the filing of the submitting appearance was due to an error on the part of the first and second defendants' solicitors. It is not disputed that the parties at all relevant times treated the first and second defendants as active opponents. In those circumstances, I do not consider that I should make any different order as to costs, save that the defendants' costs are not to include the costs of or incidental to the notice of motion dated 7 August 2009.

4 It was submitted for the plaintiffs that the defendants should be ordered to pay additional costs incurred by the plaintiffs arising from the alleged delay by the defendants in producing documents. One of the administrators, Mr Beattie, deposed that there had been substantial delay in the provision of the books and records of the third defendant by its directors. These proceedings were commenced on 7 July 2009 and the orders sought in the originating process included declaration and orders in relation to the delivery up of books and records of the company.

5 Orders were made by consent on 13 July 2009 in respect of the production of documents. The plaintiffs submit that notwithstanding that I have found that the administrators were not validly appointed, until orders were made bringing the administration to an end the directors were required to comply with the administrator's demands and that, therefore, additional costs incurred by the plaintiffs, arising from the alleged non-compliance with the demands, should be borne by the defendants. Whether there was non-compliance with the orders, and the reasons for any non-compliance that there may have been, are not questions which have been litigated. The defendants did not oppose the orders for production. To the contrary, they consented to those orders without prejudice to their contention that the administrators were not entitled to demand production of documents because they were not validly appointed.

6 On the findings which I have made, had the plaintiffs litigated to a conclusion their demand that the defendants produce documents, then that claim would have failed. In these circumstances, I do not consider that the allegations concerning non-compliance with demands or orders for the production of documents warrant any different costs order.

7 The plaintiffs also submitted that the administrators would be entitled to an indemnity under s 443D out of the assets of the company in respect of any amounts that might be payable pursuant to a costs order against them. The plaintiffs in their written submission, for more abundant caution, sought an order reflecting that statutory indemnity. There has been no issue litigated as to whether the plaintiffs are entitled to an indemnity under s 443D. There is a question whether, having regard to my findings, that section can be availed of by the plaintiffs. If it can, then the question might arise under s 443D(aa) as to whether the plaintiffs have acted in good faith and without negligence. It would not be right to pre-empt the resolution of those questions by the form of a costs order when the issues raised under this section have not been litigated.

8 In my view, the appropriate order to be made under s 98 of the Civil Procedure Act 2005 (NSW) is that the plaintiffs pay the defendants' costs of the proceedings, except that there be no order as to costs of or incidental to the defendants' notice of motion of 7 August 2009.

9 The second issue arises because it is thought, by at least the defendants, that it might be material to a decision as to whether the plaintiffs are entitled to an indemnity under s 443D whether a declaration was made under s 447C to the effect that the administrators were not validly appointed. No application was made in the proceedings by the defendants for an order under s 447C, but Mr Katekar submits that, in reliance on r 36.1, the Court should make a further order (within the terms of the rule, that is a declaration). The commentary to Ritchie, Uniform Civil Procedure NSW in respect of that rule states that:

“ In proceedings for a declaration, it commonly happens that a Court may, when resolving proceedings in favour of a defendant, make a declaration contrary to that sought by the unsuccessful plaintiff, even though no formal claim was made by the defendant. ”

10 Mr Wood submits that it would be unfair to entertain such an application because the parties adopted the forensic position during the hearing where questions of onus of proof loomed large. He rightly says that he is not in a position to deal with that application and should not be required to deal with the application today, as it has been brought on without notice, and my reasons, which I delivered orally on Tuesday, have not yet become available to the parties. He also opposes the matter standing over for the application to be made. He submits that had it been proposed to make such an application, it ought to have been brought by interlocutory process, and ought to have been made at the hearing. In effect, he submits that it would not be consistent with the just, quick and cheap resolution of the real issues in the proceedings for the matter to go over to a new date.

11 It is at least arguable that I am not functus officio. No application is made to vary or set aside the orders which I made on Tuesday. It appears from the commentary to r 36.1 that it may be open to the defendants to seek the declaration which they say would give further effect to my reasons, notwithstanding the absence of a claim made by them in the proceedings. I am far from saying that that position is right. I have no view at the moment on whether the way in which the case was conducted would preclude the defendants from obtaining the declaration which they now seek. However, I think it is sufficiently arguable that the defendants may be entitled to the declaration which they now seek, and that such a declaration might have utility, that the defendants should be entitled to have that question decided. It has, I think, emerged as a real issue. As I have said, the plaintiff is not in a position to deal with it this morning and I will, therefore, stand that application over to a time to be fixed.

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