Brodyn Pty Ltd v Dasein Constructions Pty Ltd (No 2)

[2005] NSWSC 302

CITATION:	Brodyn Pty Ltd v Dasein Constructions Pty Ltd (No 2) [2005] NSWSC 302
HEARING DATE(S):	3 February and 10 March 2005; then written submissions
JUDGMENT DATE :	7 April 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Order that company and administrator pay plaintiff's costs of successful appeal against rejection of proof of debt.

CATCHWORDS:	CORPORATIONS [291]- Proof of debt- Successful appeal from rejection- Proper order for costs.
CASES CITED:	Cresvale Far East Ltd v Cresvale Securities Ltd (No 2) (2001) 39 ACSR 622 Kirwan v Cresvale Far East Ltd (in liq) (2002) 44 ACSR 21 Re National Wholemeal Bread & Biscuit Co [1892] 2 Ch 457 Re Rural & Veterinary Requisites Pty Ltd (in liq) (1978) 3 ACLR 597 Re Turner; Ex parte Curtin (1941) 12 ABC 1
PARTIES:	Brodyn Pty Limited t/as Time Cost and Quality (P) Dasein Constructions Pty Limited (D1) Brian Raymond Silvia (D2)
FILE NUMBER(S):	SC 5917/03
COUNSEL:	R Rana (P) P G Fisher (D)
SOLICITORS:	Schraders Lawyers (P) Turnbull Bowles Lawyers Pty Limited (D)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Thursday 7 April 2005

5917/03 – BRODYN PTY LTD v DASEIN CONSTRUCTIONS PTY LTD (NO 2)

JUDGMENT

1 HIS HONOUR: I delivered judgment in this matter on 15 December 2004. Because of closeness to the end of term I noted that I hoped there would be no need for any further involvement from the Court and that the parties could take out the formal orders. Unfortunately that has not been the case.

2 Paragraph 98(4) of my reasons read that the plaintiff was entitled to an order as follows:

"An order that the plaintiff is entitled to discharge of the bank guarantee and an order that the defendant pay the plaintiff's costs of the proceedings."

The second part of this order is admitted to be ambiguous and that caused the matter to be mentioned before me on 3 February and on 10 March this year and then further written submissions to be undertaken by counsel.

3 Ms Rana of counsel for the plaintiff, submitted that the appropriate order for costs is against both defendants.

4 She acknowledges that the second defendant, the administrator, was only joined by order of Barrett J on 3 May 2004 but says that:

(a) the application was vigorously fought by both defendants;

(b) the first defendant was then in administration and, apparently from what the Court was told is now in liquidation and has no funds with which to pay the plaintiff's costs;

(c) the challenge to rejection of the proof of debt was the central issue and determinative of the rights between the parties; and

(d) there is no reason why the general rule that costs should follow the event should not be applied.

5 Ms Rana referred to Cresvale Far East Ltd v Cresvale Securities Ltd (No 2) (2001) 39 ACSR 622 and on appeal Kirwan v Cresvale Far East Ltd (in liq) (2002) 44 ACSR 21 which supported the proposition that in a proper case an order for costs is made against a liquidator or administrator, with if appropriate an ancillary order for that person to be indemnified out of the assets of the company.

6 In the Cresvale case it was said that an unsuccessful liquidator or administrator in litigation ordinarily pays costs to the successful party in the same way as any other person. However, if he or she has acted reasonably, then he or she is entitled to be indemnified out of the company's assets.

7 There was some argument before me as to whether the slip rule applied. However, as the order has never been formally taken out, the matter is not one for the slip rule, but rather for the formulation of the proper order as to costs in association with putting the remaining orders of the Court into precise language.

8 Mr P G Fisher of counsel for the defendants has argued that because there was a bank guarantee for the administrator's costs which was discharged on 15 December after my judgment was delivered, that it would be quite unfair to change the order which was made in which the word "defendant" quite clearly on his submission meant corporate defendant, and not Mr Silvia the administrator.

9 As to this, I would say that the bond was for costs rightly payable to Mr Silvia, not costs which he might have to pay some other party, and secondly, that the judgment was not at all clear as to what was meant by the word "defendant".

10 Mr Fisher then says that ordinarily the costs of proving a debt must be borne by the creditor in question, though the costs of a successful appeal against a liquidator's decision to reject a proof are usually paid out of the assets of the company and not by the liquidator personally unless it is expressly so ordered and the same should apply to an administration. He cites McPherson on Company Liquidation 4th ed (LBC, 1999) at 573 and cases there cited.

11 Corporations Regulation 5.6.51 provides (as the law was previously) that a creditor must bear the cost of proving his or her debt or claim unless the Court otherwise orders. The Regulations do not deal with costs on appeal against rejection of a proof of debt.

12 The passage in McPherson is based on Re National Wholemeal Bread & Biscuit Co [1892] 2 Ch 457 which merely applied the then rule in bankruptcy. There has been very little since. However, in Re Rural & Veterinary Requisites Pty Ltd (in liq) (1978) 3 ACLR 597, W B Campbell J in the Supreme Court of Queensland allowed an appeal against a proof of debt and at 603 held that the liquidators did not act unreasonably in contesting the claims. However, he ordered at that page that the proofs of debt be admitted in full, the liquidators pay the costs of the applicants of and incidental to the summonses, but that the liquidators were entitled to their costs including costs payable to the applicants out of the assets of the company.

13 This practice appears to me to accord fairly precisely with the way in which this Court approached the problem in another connection in Cresvale.

14 I have looked at the position with respect to personal bankruptcies. Whilst in England the traditional rule referred to in the National Biscuit case has continued, in Australia what is now s 105 of the Bankruptcy Act 1966 (Cth) (and before the 1966 Act a similar provision was contained in the Bankruptcy Rules) means that there is a statutory prohibition against making the Trustee pay the costs so that all that can be done is order that the successful applicant get his costs out of the bankrupt estate unless there has been misconduct on behalf of the Trustee; see eg Re Turner; Ex parte Curtin (1941) 12 ABC 1.

15 Accordingly the orders should be as follows:

The Court declares:

1. That the judgment obtained by the first defendant in District Court proceedings No 4868 of 2003 in the sum of $183,493.64 is extinguished.

The Court orders:

2. That the administrator admit the plaintiff's claim in the sum of $78,459.65.

3. That the first defendant consent with the plaintiff to discharge the judgment in District Court proceedings No 4868 of 2003.

4. That the defendants be restrained pending discharge of the District Court judgment from taking any steps to enforce that judgment.

5. That the defendants pay the plaintiff's costs of the proceedings.

6. That the second defendant be at liberty to receive his costs including any costs paid to the plaintiff under order 5 out of the assets of the first defendant.

7. Liberty to apply.

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