Blackadder v McQuinn (No 3)
[2017] NTSC 73
•21 September 2017
CITATION:Blackadder v McQuinn & Ors (No 3) [2017] NTSC 73
PARTIES:BLACKADDER, Paul Gordon
v
MCQUINN, Justin
and
NTRDS PTY LTD
and
BLAIR PLEASH AND KATHLEEN VOURIS, VOLUNTARY ADMINISTRATOR OF NTRDS PTY LTD (ADMINISTRATORS APPOINTED)
TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION: SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:61 of 2016 (21632618)
DELIVERED ON: 21 September 2017
DELIVERED AT: Darwin
WRITTEN SUBMISSIONS: Filed 8, 9 and 23 August 2017
JUDGMENT OF: HILEY J
CATCHWORDS:
PROCEDURE - COSTS – Costs associated with consequential orders following declaration that the appointment of voluntary administrators was invalid.
Blackadder v McQuinn & Ors [2017] NTSC 29; Blackadder v McQuinn & Ors (No 2) [2017] NTSC 37 referred to
REPRESENTATION:
Counsel:
Plaintiff:M Crawley
First Defendant: P Cozens
Second Defendant: No appearance
Third Defendant: A Smith
Solicitors:
Plaintiff:Paul Maher
First Defendant: Cozens Johansen
Second Defendant: Self-represented
Third Defendant: HWL Ebsworth
Judgment category classification: C
Judgment ID Number: Hil1712
Number of pages: 11
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWINBlackadder v McQuinn & Ors (No 3) [2017] NTSC 73
No. 61 of 2016 (21632618)
BETWEEN:
PAUL GORDON BLACKADDER
Plaintiff
AND
JUSTIN MCQUINN
First Defendant
AND
NTRDS PTY LTD
Second Defendant
AND
BLAIR PLEASH AND KATHLEEN VOURIS, VOLUNTARY ADMINISTRATOR OF NTRDS PTY LTD (ADMINISTRATORS APPOINTED)
Third Defendant
CORAM: HILEY J
REASONS FOR JUDGMENT
(Dated 21 September 2017)
Introduction
On 13 April 2017 I declared that the appointment of the Third Defendant as voluntary administrators (the administrators) of the Second Defendant (the Company) was invalid (the Declaration). When I provided my reasons for that decision[1] (the April Reasons) I indicated that I would hear the parties further concerning the other orders sought in the Interlocutory Process filed 22 March 2017 (the consequential orders), they being orders consequential upon my determination that the appointment was invalid. I said that I hoped that this could be done in writing without the need for further oral argument.
The consequential orders concerned the entitlements of the Third Defendant to: (i) be paid their reasonable remuneration, costs and disbursements incurred in their capacity acting as purported voluntary administrators of the Company from the assets of the Company; (ii) a lien to secure any such remuneration, costs and disbursements; and (iii) their reasonable costs and remuneration in respect of and arising from their application for the Declaration.
Notwithstanding my preference for these consequential matters to be subject of written submissions and dealt with on the papers they were argued in Court on 22 June 2017. On 26 July 2017 I made orders substantially the same as the orders sought by the Third Defendant and provided reasons for those orders (the July Reasons).[2]
Those orders included the following:
1.The reasonable remuneration, costs and disbursements of the Third Defendants in their capacities as former joint and several voluntary administrators of the Second Defendant be paid from the assets of the Second Defendant.
2.The Third Defendants are entitled to a lien to secure any reasonable remuneration, costs and disbursements incurred by them in their capacity as purported voluntary administrators.
3.The Third Defendants are entitled to be paid their reasonable costs and remuneration in respect of and arising from the interlocutory process dated 22 March 2017, such monies to be paid by one or more of the other parties.
The only remaining question was whether the costs and remuneration referred to in Order 3 should be paid out of the assets of the Second Defendant (the Company) or by another party such as the Plaintiff. As I said at [54] of the July Reasons I considered that the Company and or the First Defendant should pay the Third Defendant’s costs of the proceedings heard on 7 April 2017 that resulted in the making of the Declaration. However neither the Company nor the First Defendant resisted the administrators’ application for the consequential orders (for remuneration, costs and the lien). But for the Plaintiff’s strenuous objections to those claims, it is likely that those orders would have been made on the papers without the need for a further hearing and for the Court to provide substantive reasons. I made the following orders giving the parties the opportunity to provide written submissions if any of them wished to contend that the costs the subject of Order 3 should not be paid out of the assets of the Company:
4.Unless any party contends otherwise within 14 days, the Second Defendant is to pay the Third Defendant's costs referred to in Order 3 on an indemnity basis.
5.In the event that any party contends that the Second Defendant should not pay the Third Defendant’s costs referred to in Order 3 on an indemnity basis, that party shall file submissions in support of such contention within 14 days, and any other party may file contentions in response within a further 14 days.
I also made an order requiring service of the Orders of 27 July upon the Company as it had not appeared at the hearing on 22 June and had not provided any submissions prior to that hearing.
On 8 August 2017 the First Defendant filed submissions contending that the Plaintiff, and not the Second Defendant, should pay the Third Defendant’s costs of and incidental to the proceedings heard on 22 June 2017 (the 22 June proceedings). This was followed by submissions filed on behalf of the Third Defendant on 9 August and further submissions in response on behalf of the Plaintiff and the Third Defendant. No submissions were filed on behalf of the Second Defendant although it had been served with the orders that I made on 27 July 2017.
This judgment relates to who should pay the Third Defendant’s costs under Order 3 and on what basis, and in particular who should pay the costs of and incidental to the 22 June proceedings.
Relevant facts
On 27 April the solicitors for the Third Defendant proposed to the solicitors for the Plaintiff and the solicitors for the First Defendant that the parties agree on consent orders and provide the Court with short submissions to enable the Court to be satisfied that it would be appropriate to make the orders, preferably in chambers. In addition to requesting the Court to make the consequential orders the solicitors for the Third Defendant attempted to have the quantum of their remuneration agreed at $106,053.30 plus GST. That figure was based upon substantial details already provided to the solicitors for the Plaintiff and the First Defendant on 12 April 2017. The solicitors for the Plaintiff rejected the Third Defendant’s proposal to have the matters dealt with on the papers.
It seems that, until 20 June 2017, the Plaintiff’s objection to having the matters dealt with on the papers was based upon its concerns about the quantum of the administrators’ remuneration, not the consequential orders themselves. During a telephone conversation on 3 May the solicitor for the Plaintiff said words to the following effect to the solicitor for the Third Defendant:
We are not actively opposing the application, but we will say that there should have been things alerting the administrators at an earlier time that the company was solvent. From a legal point of view we query what is recoverable on a quantum meruit basis. We might only take part in the hearing at the outset to make our comments, then allow the Court to determine it. We are not interested in a line by line taxation.
On 9 May my associate was advised by the solicitor for the Plaintiff inter alia:
The plaintiff will wish to ensure that certain things are put to the court, but will be taking a neutral position regarding the orders sought by the third defendants.
On 8 June the solicitors for the Third Defendant made a further attempt to resolve the outstanding issues. On 20 June the solicitors for the First Defendant undertook to abide by any order that the Court might make in relation to the consequential orders.
The “neutral position” foreshadowed by the solicitors for the Plaintiff changed on 20 June when counsel for the Plaintiff provided his written submissions. These submissions raised serious allegations against the administrators, accusing them of breaching their duty to the Company by accepting the appointment when they did. Accordingly the administrators should not recover any of the fees and costs incurred by them. Counsel for the Plaintiff also contended that if the administrators are entitled to any remuneration it should only be for work that was of incontrovertible benefit to the Company. These two contentions occupied most of the hearing on 22 June and were rejected by me for the reasons given on 26 July 2017.
Contentions and rulings
No party contended that the Third Defendant should not be paid the costs referred to in Order 3 on an indemnity basis. Nor has any party contended that the Third Defendant’s costs of the proceedings heard on 7 April 2017 culminating in the Declaration should not be paid by the Second Defendant. Accordingly I will so order.
However the parties differ as to who should pay the Third Defendant’s costs of and incidental to the 22 June proceedings:
(a)The First Defendant contends that the Plaintiff, and not the Second Defendant, should pay those costs.
(b)The Third Defendant disagree with that contention. The administrators contend that the Second Defendant should pay the costs and that the Plaintiff should indemnify the Second Defendant on the standard basis for those costs or the Plaintiff should also be liable for those costs.
(c)The Plaintiff contends that the Second Defendant, not the Plaintiff, should pay the costs.
(d)The Second Defendant has continued to remain silent.
The main argument put against the Plaintiff is that those costs were only incurred because of his refusal to consent to the orders sought or to accept the offer of compromise made on 8 June 2017 and because he forced the administrators to incur substantial additional costs by having to answer the serious allegations made against them on 20 and 22 June 2017.
The main argument put by the Plaintiff was that he was the only person with a financial interest in the Company who was prepared to play the role of contradictor. Counsel for the Third Defendant contended that the Plaintiff no longer held a relevant financial interest in the Company having already sold his shares in the Company for an amount based upon the value of the Company at a time prior to the date when it was placed under voluntary administration. Counsel for the Plaintiff disputed this contention and maintained that the Court may well determine that the Company should be valued at the time when it makes final orders in the substantive proceeding as a consequence of which the sale price will be directly affected by the quantum of any remuneration payable to the administrators. The facts available to me do not enable me to determine that question.
Irrespective of the nature and extent of the Plaintiff’s interest in the Company, and thus whether he was truly entitled to take the position that he did in the interests of the Company and whether he might be entitled to some kind of indemnity from the Company for doing so, the fact is his contentions in the 22 June proceedings were rejected. He lost. The Third Defendant was wholly successful.
Counsel for the Plaintiff also contended that “there was never a suggestion that Blackadder could be liable for the administrators’ fees or costs incurred before the application [sic] heard 22 June 2017.” This contention is inconsistent with the sworn evidence of Mr Sanders, which I accept, to the effect that he told Mr Maher during their discussion on 3 May that if the matter had to proceed to Court and the Plaintiff was the only party who was not consenting to the proposed orders he might be exposed to costs orders.
No good reason has been shown why the Plaintiff should not be liable to pay the administrators’ costs of the 22 June proceedings.
The remaining question is whether the Second Defendant should also be liable to pay those costs, and the further costs incurred by the Third Defendant in relation to the matters dealt with in this judgement. While I accept that the First Defendant attempted to minimise costs by agreeing to abide the Court’s decision concerning the consequential orders and that the Second Defendant did not appear or otherwise raise any objection in relation to the consequential orders or its potential liability to pay all of the administrators’ costs, I agree with counsel for the Third Defendant that they would not have been placed in the position of applying for the Declaration and seeking the consequential orders but for the actions of the First Defendant and the Second Defendant in appointing them as voluntary administrators in the first place.
It seems that the Third Defendant has retained and has a lien over Company funds which should cover most if not all of their costs. There is no reason why they should be deprived of the ability to recover their costs from this fund and forced to pursue the Plaintiff instead.
Accordingly I accept the Third Defendant’s contention to the effect that the Second Defendant is to pay all of their reasonable costs and remuneration and that the Plaintiff indemnify the Second Defendant on the standard basis for the costs payable by it to the Third Defendant arising from and incidental to the hearing on 22 June 2017.
Orders
Accordingly I order that:
1.The Second Defendant is to pay the Third Defendant's costs referred to in Order 3 of the Orders made on 26 July 2017 on an indemnity basis.
2.The Second Defendant is to pay the Third Defendant's further costs incurred in relation to the contentions made under Orders 4 and 5 of the Orders made on 26 July 2017 on an indemnity basis.
3.The Plaintiff indemnify the Second Defendant on the standard basis for the costs payable by the Second Defendant to the Third Defendant arising from and incidental to the hearing on 22 June 2017 and for the costs payable under Order 2 above.
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[1] Blackadder v McQuinn & Ors [2017] NTSC 29.
[2] Blackadder v McQuinn & Ors (No 2) [2017] NTSC 37.
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