Chapman v Luminis Pty Ltd (No 6)

[2002] FCA 1100

FEDERAL COURT OF AUSTRALIA

Chapman v Luminis Pty Ltd (No 6) [2002] FCA 1100

COSTS – order for costs sought by successful respondents against applicant joined under FCR O 6 r 8 as a party who ought to be joined, and to ensure that all matters in dispute in the proceedings may be effectively and completely determined – applicant an assignor of causes of action – applicant joined as the respondents contended that the assignments were not absolute legal assignments – applicant consented to the use of its name at the cost and expense of the other applicants who were the assignees of the causes of action – order for costs refused.

Federal Court Rules O 6 r 8

Chapman v Luminis Pty Ltd (1998) 86 FCR 513 referred to
Chapman v Luminis Pty Ltd (No 5) [2001] FCA 1106 referred to
Oshlack v Richmond River Council (1998) 193 CLR 72 discussed
Gore v Justice Corp Pty Ltd [2002] FCAFC 83 distinguished

THOMAS LINCOLN CHAPMAN, WENDY JENNIFER CHAPMAN & BINALONG PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) v LUMINIS PTY LTD, DEANE JOANNE FERGIE, CHERYL ANNE SAUNDERS, ROBERT EDWARD TICKNER & COMMONWEALTH OF AUSTRALIA

No SG 33 of 1997

von DOUSSA J
ADELAIDE
10 SEPTEMBER 2002

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 33 OF 1997

BETWEEN:

THOMAS LINCOLN CHAPMAN
FIRST APPLICANT

WENDY JENNIFER CHAPMAN
SECOND APPLICANT

BINALONG PTY LTD (RECEIVERS & MANAGERS APPOINTED (IN LIQUIDATION)
THIRD APPLICANT

AND:

LUMINIS PTY LTD
FIRST RESPONDENT

DEANE JOANNE FERGIE
SECOND RESPONDENT

CHERYL ANNE SAUNDERS
THIRD RESPONDENT

ROBERT EDWARD TICKNER
FOURTH RESPONDENT

COMMONWEALTH OF AUSTRALIA
FIFTH RESPONDENT

JUDGE:

von DOUSSA J

DATE OF ORDER:

10 SEPTEMBER 2002

WHERE MADE:

ADELAIDE

THE COURT ORDERS THAT:

1.The claim for costs made by the third, fourth and fifth respondents against the applicant, Binalong Pty Ltd (Receivers and Managers appointed) (in Liquidation) is dismissed.

2.The third, fourth and fifth respondents pay the costs of Binalong of and incidental to their application against Binalong for the costs of the proceedings. 

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 33 OF 1997

BETWEEN:

THOMAS LINCOLN CHAPMAN
FIRST APPLICANT

WENDY JENNIFER CHAPMAN
SECOND APPLICANT

BINALONG PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION)
THIRD APPLICANT

AND:

LUMINIS PTY LTD
FIRST RESPONDENT

DEANE JOANNE FERGIE
SECOND RESPONDENT

CHERYL ANNE SAUNDERS
THIRD RESPONDENT

ROBERT EDWARD TICKNER
FOURTH RESPONDENT

COMMONWEALTH OF AUSTRALIA
FIFTH RESPONDENT

JUDGE:	von DOUSSA J
DATE:	10 SEPTEMBER 2002
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1. This is an application by the third, fourth and fifth respondents, Professor Saunders, Mr Tickner and the Commonwealth of Australia (the Commonwealth respondents) for an order for costs against Binalong Pty Ltd (Receivers and Managers appointed) (in Liquidation) (Binalong).  The application is the sequel of Chapman v Luminis Pty Ltd (1998) 86 FCR 513 (Chapman (No 1)) and Chapman v Luminis Pty Ltd (No 5) [2001] FCA 1106 (Chapman (No 5)).  In the first of those decisions the applicants, Mr and Mrs Chapman (the Chapmans), who were at that time the only applicants in the proceedings, were given leave to join Binalong as an applicant.  The terms of the order giving leave are discussed below.  The second of the decisions dealt with the merits of the claims prosecuted in the proceedings.  All claims were dismissed and judgment was entered in favour of the respondents.

2. Many issues have arisen since final judgment as to the liability of the applicants and non-parties for the respondents’ costs.  The present application concerns only a claim by the Commonwealth respondents that Binalong should be one of the parties jointly and severally liable for the Commonwealth respondents’ costs. 

3. The application is made only against Binalong.  It is not sought to make the liquidator of Binalong personally liable for the costs.  The application is opposed by Binalong on the ground that, whilst it was nominally an applicant, it took no role in the proceedings, and the real applicants, to the knowledge at all times of the respondents, were the Chapmans.

4. The Commonwealth respondents rely on the ordinary rule that costs follow the event.  However, in my opinion, this is not a case where that ordinary rule should operate so as to impose an order for costs on Binalong. 

5. The circumstances in which Binalong was joined are recorded in Chapman (No 1).  The subject matter of the proceedings commenced by the Chapmans on 23 May 1997 are briefly recorded in Chapman (No 1) at 515 – 516, and more fully discussed in Chapman (No 5).  Mr and Mrs Chapman purported to sue as assignees of Binalong, and in that capacity sought to enforce causes of action which they contended Binalong had against the respondents.  That they sued as assignees was pleaded in pars 6, 7, 7A and 7B of the amended statement of claim:  Chapman (No 1) at 516 – 517.  Those paragraphs gave particulars of two deeds of assignment, and notices of assignment were given to the respondents.

6. In their defence, the Commonwealth respondents, whilst admitting having received notice of purported assignments, pleaded that the purported assignments were not valid and effective assignments of Binalong’s rights to the Chapmans.  The defence pleaded that the Chapmans therefore had no standing to bring or maintain the action against the Commonwealth respondents. 

7. The Chapmans sought, and were given, further particulars as to why the Commonwealth respondents contended that the assignments were not valid and effective:  Chapman (No 1) at 517 – 518. The Commonwealth respondents’ primary contention was that the deeds of assignment did not effect absolute assignments of the relevant causes of action because certain rights in respect of them and their enforcement were retained by the assignor. A subsidiary contention was also raised that, insofar as the deeds purported to assign causes of action arising under s 82 of the Trade Practices Act 1974 (Cth) (and corresponding provisions under Fair Trading Acts), such causes of action were incapable of being assigned at law or in equity.

8. The Chapmans by notice of motion then sought orders giving leave to join Binalong as an applicant, and to amend the statement of claim by adding a new paragraph as follows:

   “7CIn the event and to the extent the assignments referred to in paragraphs 6 and/or 7A are invalid and/or ineffective, or in the alternative incomplete in that such assignments are effective only to transfer an equitable interest or some other partial interest only in any of the respective causes of action or rights mentioned in paragraphs 6 or 7A.  Binalong seeks to enforce such causes of action and/or rights against the relevant Respondents and recover from them in respect of the same.” 

9. Leave as sought was granted for the reasons given in Chapman (No 1).  The proceedings were then amended to add Binalong as an applicant, and the statement of claim was amended to include the proposed par 7C.  It will be noted that par 7C is plainly a plea in the alternative to operate “In the event and to the extent the assignments referred to in paragraphs 6 and/or 7A are invalid and/or ineffective, or in the alternative incomplete …”. 

10. The terms of the formal order giving leave, relevantly provided that, subject to the applicants and another company giving security to the liquidator of Binalong to protect the liquidator against liability arising from the joinder of Binalong: 

    “… the first and second applicants at their own expense and risk as to costs be authorised to use the name Binalong … as joint applicant with the existing applicants in this action.”

11. The order giving leave to join Binalong as a party was made under the Federal Court Rules O 6, r 8.  (The references to the order being made under FCR O 6, r 2 at pars [208], [209] and [210] of Chapman (No 5) are mistaken.)  FCR O 6 r 8 provides:

    “(1)     Where a person who is not a party –

    (a)ought to have been joined as a party;  or

    (b)is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon,

    the Court, on application by him or by any party or of its own motion, may order that he be added as a party and make orders for the further conduct of the proceeding.”

    In Chapman (No 1) at 519 the following reasons for making the order were given:

    “If the deeds of assignment are valid and effective as assignments under s 15, [of the Law of Property Act 1936 (SA)] Binalong is not a necessary party to the proceedings.  Mr and Mrs Chapman, as the assignees at law, are the proper parties to proceedings to enforce the assigned causes of action:  Halsburys Laws of England, (4^th ed, 1984), vol 6, par 13.

    Mr and Mrs Chapman, however, seek to join Binalong to provide for the contingency that the Court holds there is merit in the respondents’ contention that the deeds of assignment do not effect assignments under s 15, for one or more of the reasons argued by the respondents.  Mr and Mrs Chapman contend that if the deeds of assignment are not effective as assignments under s 15 they are nevertheless effective as equitable assignments of the causes of action which Binalong has against the respondents, and that Mr and Mrs Chapman are now the persons beneficially entitled to the benefit of the causes of action.  Therefore, as an alternative position, they seek to constitute the proceedings in a manner appropriate for the enforcement by them as equitable assignees of the choses of action.  As equitable assignees they are entitled to bring proceedings to enforce the choses of action, but subject to the procedural requirement that the assignor be joined as an additional party to the proceedings.  The courts have imposed the procedural requirement that the assignor be joined so that the assignor becomes bound by the decision, and the parties sued protected:  Three Rivers District Council v Bank of England [1996] QB 292 at 313 per Gibson L J, McIntre v Gye (1994) 51 FCR 472 at 479; 122 ALR 289 at 295 and Stein v Blake [1996] AC 243 at 259.

    The contention that the deeds of assignment are not valid and effective as a matter of law, in my opinion, makes it appropriate for Mr and Mrs Chapman to seek to join Binalong as a party to the proceedings, to provide for the contingency that there is merit in the respondents’ contention.  Within the meaning of O 6, r 8 of the Federal Court Rules, Binalong is in these circumstances a person who ought to be joined as a party and, moreover, is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceedings may be effectively and completely determined and adjudicated upon.  In my opinion the order sought by the applicants should be made under this rule.”

12. In accordance with FCR O 6, r 8(2) Binalong was joined as an applicant as it consented to that course.  The consent followed the giving of an indemnity and security to the liquidator.  However, as counsel for the Commonwealth respondents properly concedes, had consent not been given, Binalong could have been joined by the Chapmans as a respondent.  Had that occurred, on no ground could it be contended that Binalong should be liable for the costs of the other respondents in the proceedings.  

13. What then followed in the proceedings is of central importance to the outcome of the present application.  Once Binalong was joined, and the statement of claim amended to plead par 7C, no further argument was addressed to the Court at any stage in the proceedings to the effect that the deeds of assignment did not effect absolute assignments.  Arguments about the validity and effectiveness of the assignments raised before the amendments thereafter became dead issues. 

14. It is significant that in opposition to the application to join Binalong, the Commonwealth respondents contended that the Court should refuse to allow the joinder as Binalong would not be a real applicant:  see Chapman (No 1) at 520.  Following the amendments nothing occurred to suggest that Binalong was taking any part in the proceedings.  In my opinion it was common ground between the parties that the applicants for all intents and purposes were the Chapmans.  The Commonwealth respondents knew from Chapman (No 1) and the terms of the order giving leave to join Binalong, that it was the Chapmans who were, at their expense and risk as to costs, using the name of Binalong to cover the contingency that the Commonwealth respondents thereafter successfully pursued their argument that the deeds of assignment were not valid and effective.  In that event, Binalong’s joinder as a party was solely to properly constitute the action so that the Chapmans could prosecute their claims as equitable assignees.

15. Binalong did not apply to become a party, it was joined by the Chapmans.  The Chapmans were at all times the real applicants.  Binalong’s role, to the knowledge of the Commonwealth respondents, was a nominal one made necessary by an argument anticipated by the Commonwealth respondents which, in the event, they did not pursue.  For these reasons I consider that the application for costs against Binalong should fail. 

16. The arguments presented by senior counsel for the Commonwealth respondents do not persuade me to a different view. 

17. In support of the ordinary rule that costs follow the event, the Commonwealth respondents refer to Oshlack v Richmond River Council (1998) 193 CLR 72 at [67] where McHugh J discussed the expression “usual order as to costs”. His Honour said the expression embodied “the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour”. His Honour referred to a number of traditional exceptions which do not cover the present case. However, I do not understand his Honour to have intended to lay down an absolute principle that every party, nominal or otherwise, who is unsuccessful must bear the burden of an order for costs in favour of the successful party or parties. His Honour was referring to the principle that successful parties should ordinarily receive an award of costs, but to state that proposition poses the further question: which other parties should bear the burden? It is of note that, having referred to the general principle, McHugh J continued at [67] – [68]:

    “The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant.  Costs are not awarded to punish an unsuccessful party.  The primary purpose of an award of costs is to indemnify the successful party.  If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did.  As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.

    As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved.  Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.”

18. The purpose of awarding costs does not dictate that an order for costs should be made against a nominal party in proceedings, fulfilling a role like that of Binalong in the present proceedings.  The purpose provides strong grounds for imposing the burden of costs on the real parties who unsuccessfully prosecute claims against the successful parties.  I do not think that the observations of McHugh J or the purpose which he has identified, requires that an order for costs be made against Binalong.

19. The Commonwealth respondents, by reference to the pleadings, seek to establish that Binalong adopted more than a nominal role in the proceedings.  Attention is directed to the third amended statement of claim (being the version of the statement of claim which immediately followed the amendment to include par 7C).  First it is noted that par 7C, after reciting the contingency in which the pleading is to operate, says:

    “Binalong seeks to enforce such causes of action and/or rights against the relevant Respondents and recover from them in respect of the same.”

    Secondly, it is noted that at the conclusion of the statement of claim after pleading many losses, “the applicant’s claim” among other things, damages, interest and costs.  The argument is put:  “Sauce for the goose is sauce for the gander”.

20. In my opinion it must have been obvious to the Commonwealth respondents that Binalong was not seeking to adopt a role in the proceedings other than as a nominal party fulfilling the role anticipated by Chapman (No 1).  There is no basis for the suggestion now made that Binalong, in some unrevealed way, was taking any real part in the proceedings. 

21. The Commonwealth respondents also refer to the fate of the claims for damages prosecuted under s 82 of the Trade Practices Act, and corresponding State legislation.  In Chapman (No 5) at [204] – [207] it was held that causes of action under these statutory provisions were not capable of assignment, so that such causes of action (assuming they could be made out on the facts) could be brought only by Binalong.  The finding at [204] – [207] was given as one of the reasons why the claim by the Chapmans as assignees must fail.  The Court did not consider these statutory claims on the footing that they were being independently prosecuted by Binalong.  Binalong did not suddenly appear out of the mist at that stage of the case and become a real applicant.

22. Although it was held that the Trade Practices Act claims must fail for several other reasons, the Court did, at [209]-[215], deal with a plea raised by the respondents that the claims were in any event out of time. In this respect it was the respondents who raised the possibility that Binalong could be treated as a real applicant: see [209]. Counsel for the applicants, however, entered into the debate about the limitation point, and advanced the argument that if Binalong’s joinder was treated as occurring under FCR O 13 r 2, the joinder would backdate to the issue of the application: see [210]. Perhaps this argument did seek to elevate the role of Binalong to that of a real litigant, but in the circumstances I do not think that the submission indicates anything more than that the Chapmans were by that submission exceeding the authority given to them under the order of 4 September 1998 to use the name of Binalong for the purpose discussed in Chapman (No 1).

23. Similarly, I do not think the fact that the appeal from the judgment in Chapman (No 5), instituted by the Chapmans, includes Binalong as an appellant indicates that Binalong has adopted the role of a real party in the litigation.  The liquidator of Binalong says that he has given no instructions for an appeal. 

24. The Commonwealth respondents also rely on clause 3 of a deed dated 2 October 1998 between Binalong, the Chapmans, and Kebaro Pty Ltd (Kebaro).  Kebaro is a trust company controlled by Mr Chapman which acquired the marina complex at Hindmarsh Island on 30 September 1997.  Under the deed that company provided security by way of mortgage over certain land to support the indemnity given under the deed to the liquidator in consideration of the liquidator consenting to the use of the name of Binalong in these proceedings.  By clause 3 of the deed:

    “The Chapmans and Kebaro hereby jointly and severally undertake to indemnify and keep indemnified the Company [Binalong] and the Liquidator respectively against any costs, charges or expenses referred to in paragraphs 6 and 7 in connection with or arising out of the proceedings.”

    Clause 6 defines costs, charges, expenses and liabilities to which the indemnity related.  Clause 7 imposes a liability on the Chapmans and Kebaro to pay the costs, charges and expenses of the liquidator arising from his entering into the deed and consequent involvement he might have in the proceedings.  Clause 6 includes the following provisions:

    “6.1The costs, charges, expenses or liability in connection with or arising out of the proceedings shall be: 

    6.1.1The costs and disbursements of the Company and the Liquidator to supervise the proceedings, the reporting of the same to the Company’s creditors and to maintain the Company limited to the sum of $3,500 per annum.

    6.1.2Any liability for the costs and expenses of any of the respondents or any other person for which the Liquidator may become liable whether by way of Court order or otherwise arising out of or incidental to the proceedings.

    …”

1. The deed of 2 October 1998 was critical to the liquidator giving his consent to the use of the name of Binalong.  It was executed as part of a course of events which led up to the liquidator giving consent.  These events concerned the due administration of the liquidation of Binalong.  These events are set out in an affidavit by the liquidator, Anthony Stevens Smith, sworn on 18 June 2002 for the purpose of the present application.  These events are collateral to the proceedings in this Court.  They did not involve the Commonwealth respondents, and in my view are of marginal relevance to the present application.  Mr Smith deposes that in March and April 1997 correspondence took place between himself and the Chapmans in which the latter asserted that they would not accept the liquidator “walking away” from what they considered to be substantial claims by Binalong against the respondents or some of them.  Mr Smith said that the administration of Binalong was unfunded and he was not obliged to incur expense of the kind suggested in the winding up.  He said he would seek directions from the Supreme Court of South Australia as to his obligations to institute proceedings.  The Chapmans then made a proposal that the rights of Binalong against certain of the respondents be assigned to them for the consideration of $1 plus 20% of the net proceeds of the action.  Then, and at all material times, Partnership Pacific Ltd (PPL) held a registered fixed and floating charge over the assets of Binalong.  The liquidator considered that it was unlikely that any proceeds from the action would ever be available to his administration because of the charge.  (Evidence led at the trial indicates that at 30 June 1997 the total indebtedness of Binalong to PPL was in excess of $22 million.)

2. Directions were sought from the Supreme Court of South Australia.  On 21 May 1997 the Supreme Court directed that the liquidator was not obliged, in the absence of an indemnity as to costs, to issue proceedings on behalf of Binalong against the first, second and third respondents in these proceedings (Luminis Pty Ltd, Dr Fergie and Prof Saunders).  However, the liquidator was directed that he may lawfully assign causes of action against those respondents to the Chapmans in terms of the first deed of assignment (referred to in par 6 of the statement of claim:  Chapman (No 1) at 516). 

3. Shortly after the first deed of assignment was executed, Mr Smith received further correspondence from the solicitors for the Chapmans concerning the assignment of causes of action against Mr Tickner and the Commonwealth.  The Chapmans proposed that the consideration for this assignment be $1 plus 50% of the net proceeds from the further causes of action, and further proposed that the first deed of assignment be amended to increase the stated consideration to $1 and 50% of the net proceeds of the action. 

4. By reason of PPL’s security Mr Smith continued to consider that it was unlikely that any proceeds from the action against the respondents could become available to unsecured creditors.  Nevertheless he reported on the proposal to creditors and enquired if creditors were prepared to prosecute the causes of action which the Chapmans asserted Binalong had against the respondents.  No creditor responded.  Other sources of finance to fund proceedings were not available.  Mr Smith sought further directions from the Supreme Court. 

5. On 23 September 1997 the Supreme Court directed that the liquidator had no obligation to issue proceedings against Mr Tickner, the Commonwealth, and a number of other parties who had been nominated by the Chapmans in their correspondence as potential respondents.  The Supreme Court authorised the liquidator to enter into the second deed of assignment.  That deed was later executed and is the subject of par 7A of the statement of claim:  see Chapman (No 1) at 517.

6. In March 1998 Mr Smith was advised by solicitors for the Chapmans of a possible challenge by the Commonwealth respondents to the validity and effectiveness of the first and second deeds of assignment.  On 17 July 1998 the Chapmans made application in the Supreme Court seeking leave to amend the terms of the first and second deeds in a way apparently intended to overcome the potential challenge by the Commonwealth respondents.  The fate of that application is not clear from Mr Smith’s affidavit and the exhibits to it.  However, it appears that the Court sanctioned Binalong entering into the deed of 2 October 1998 authorising the use of the company name Binalong as a joint applicant in these proceedings, subject to the liquidator obtaining security to support the indemnity to Binalong and the liquidator in the event that the use of Binalong’s name caused them to incur liabilities.  The terms of the deed of 2 October 1998, in my opinion, reflects no more than a prudent step which the Supreme Court required before giving its authority for the use of the name of Binalong to ensure that the company and the liquidator did not stand unprotected for any liability that might flow from the use of Binalong’s name.  I do not think that the deed provides any basis upon which the third respondents can now contend that they had any reasonable basis for believing that Binalong was to become a real party in the proceedings against whom they could claim costs in the event that the application failed.

7. The order giving leave to the Chapmans to use the name of Binalong as an applicant was made on 4 September 1998, and the proceedings were amended accordingly shortly afterwards.  On 2 December 1999 Mr Smith received the first of several letters from the Australian Government Solicitor on behalf of the Commonwealth respondents, purporting to put Mr Smith on notice that the Commonwealth respondents proposed to seek an order for costs against both Binalong and the liquidator personally in the event that the proceedings against the respondents failed.  On 16 March 2000 Mr Smith, in his capacity as liquidator, had his solicitors deny that he would be liable for costs.  The solicitors went on to say:

   “Various interlocutory matters that have been dealt with concerning Binalong’s name being used in the proceedings and the discovery process itself, clearly demonstrates that my client is not running the proceedings in the Federal Court, nor is he or the unsecured creditors of his Administration obtaining any direct benefit from those proceedings.

   Pursuant to orders made by Justice von Doussa on 4 September 1998, the first and second applicants have been granted leave to use the Company name only for the purposes of the litigation.  As I understand it, the sole reason for the Company’s name being used in the proceedings, is the respondents challenge to the assignment of the relevant cause of action.

   If your client was concerned about any liability it has for costs in the proceedings and the recovery of those costs from Binalong, or indeed any other applicant to the proceedings then it should have pursued further orders for security for costs.  They have chosen not to.”

8. In the course of the correspondence the Australian Government Solicitor made the strange observation that the liquidator and Binalong could protect themselves from a claim for costs by the Commonwealth respondents by abandoning any claim for damages from the proceedings.  The deeds of assignment did not reserve to Binalong and the liquidator any control over the conduct of the litigation which would enable them to limit the claim for damages made by the Chapmans.  If the letter was intended to refer to the entitlement of Binalong to receive 50% of the net proceeds of the action from the Chapmans in the event of success, it is difficult to see how, by releasing the Chapmans from the obligation to pay the consideration (and assuming that the Supreme Court consented to such a change), that could have had any effect upon the way in which the proceedings were thereafter conducted by the applicants.  I do not think that this correspondence assists the present application by the Commonwealth respondents.  Of rather more significance is the evidence from Mr Smith set out in the following paragraphs of his affidavit:

   “33.My administration is still without funds and is unlikely to ever receive any funds.  Since at least the time when the [first and second] respondents obtained security for cost orders the AGS [Australian Government Solicitor – the solicitor for the Commonwealth respondents] have been aware that my administration has been unfunded.

   34.The respondents did not advise me prior to or at the time that His Honour Justice von Doussa made orders authorising the use by the Chapmans of Binalong’s name in the proceedings that they considered that Binalong would be liable for any adverse cost orders.

   35.At no time during the course of the proceedings have I provided any instructions to the applicants’ lawyers Lynch & Meyer.

   36.My administration was unlikely to ever receive any benefit from the proceedings because of the prior ranking of the PPL serviced debt.”

9. Another reason why the Commonwealth respondents contend that Binalong should pay their costs is because it stood to gain 50% of the net proceeds of the action.  Although the consideration for the assignments, in theory at least, offered a 50% return of net proceeds from the prosecution of the assigned causes of action, such payment was not intended as part of the consideration for an agreement to provide funding for the action to be brought by the Chapmans.  The deeds of assignment did not anticipate that Binalong or the liquidator would play any active part in the conduct of litigation over the assigned causes of action, nor did they in fact.  The situation of Binalong stands in stark contrast to the position of the unsuccessful respondent in Gore v Justice Corp Pty Ltd [2002] FCAFC 83. I reject this submission.

10. For these reasons I consider that the notice of motion by the Commonwealth respondents should be dismissed, and the Commonwealth respondents should pay Binalong’s costs of the application against it for the costs of the principal proceedings. 

I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice von Doussa.

Associate:

Dated:            10 September 2002

Counsel for the Third, Fourth & Fifth Respondents:	Mr T E F Hughes QC & Mr M A Frayne
Solicitor for the Third, Fourth & Fifth Respondents:	Australian Government Solicitor
Counsel for Binalong:	Mr J M Wilkinson & Mr J Clarke
Solicitor for Binalong:	Cowell Clarke
Date of Hearing:	24 June 2002
Date of Judgment:	10 September 2002