Dundas Mining Pty Ltd (in Liquidation) v Lottah Mining Pty Ltd (Subject to Deed of Company Arrangement)
[2023] WASC 68
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: DUNDAS MINING PTY LTD (IN LIQUIDATION) -v- LOTTAH MINING PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) [2023] WASC 68
CORAM: MASTER SANDERSON
HEARD: 12 DECEMBER 2022
DELIVERED : 9 MARCH 2023
PUBLISHED : 9 MARCH 2023
FILE NO/S: COR 142 of 2022
BETWEEN: DUNDAS MINING PTY LTD (IN LIQUIDATION)
Plaintiff
AND
LOTTAH MINING PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
First Defendant
CHRISTOPHER DAMIEN DARIN in capacity as DEED ADMINISTRATOR OF LOTTAH MINING PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Second Defendant
GRAEME ROBERT BEATTIE in capacity as DEED ADMINISTRATOR OF LOTTAH MINING PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Third Defendant
Catchwords:
Costs - Application for indemnity costs - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Result:
Indemnity costs ordered
Category: B
Representation:
Counsel:
| Plaintiff | : | JE Scovell |
| First Defendant | : | No appearance |
| Second Defendant | : | K de Kerloy |
| Third Defendant | : | K de Kerloy |
Solicitors:
| Plaintiff | : | Edwards Mac Scovell Legal |
| First Defendant | : | No appearance |
| Second Defendant | : | Johnson Winter & Slattery |
| Third Defendant | : | Johnson Winter & Slattery |
Case referred to in decision:
Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Korda [2015] WASCA 101 (S)
MASTER SANDERSON:
By originating process filed 28 July 2022 the plaintiff sought the following orders:
1.That the deed of company arrangement made 21 July 2022 between Lottah Mining Pty Ltd (Administrators Appointed) (ACN 168 344 581), Rogetta Resources Pty Ltd, Gang Yang, Junyu Su, Christopher Damien Darin and Graeme Robert Beattie as joint and several Administrators of Lottah (DOCA) be terminated pursuant to section 445D(1) of the Act.
2.Further and alternatively to order 1, that the resolution of creditors dated 30 June 2022 that Lottah enter into the DOCA be set aside pursuant to section 75-41 of Schedule 2 of the Act.
3.Further to orders 1 and 2, Lottah be wound up pursuant to section 491 of the Act, alternatively section 90-15 of Schedule 2 of the Act (as the case may be), and Jack Robert James and Paula Lauren Smith be appointed as joint and several liquidators of Lottah.
4.The Plaintiff's costs of these proceedings be borne by the First Defendant and paid out of its assets and in accordance with the statutory priority regime established by the Corporations Act or alternatively, on such terms as the Court thinks fit.
5.Any other order that this Honourable Court deems fit.
The application was supported by an affidavit of Richard Scott Tucker sworn 28 July 2022. By interlocutory process filed 29 July 2022 the plaintiff sought the appointment of a provisional liquidator to the first defendant. This application was supported by a further affidavit of Mr Tucker sworn 29 July 2022. The matter was considered by the plaintiff to be urgent and on 4 August 2022 I made orders programming the matter through to a hearing on 19 August 2022. In conformity with those orders, the defendants filed an affidavit of Christopher Damien Darin sworn 10 August 2022. The plaintiff and the second and third defendants filed outlines of submissions. The plaintiff also filed two proposed amended interlocutory processes. Neither of these two proposed amended documents was considered and insofar as it is relevant, the intended hearing would have dealt with the interlocutory process as filed. In the end, the deed of company arrangement (DOCA) terminated because its terms were not satisfied. That meant the originating process was unnecessary and on 19 August 2022 I made orders which terminated the action. The remaining question is as to costs.
The defendants seek their costs on an indemnity basis. From the first return date on 4 August 2022, the defendants maintained the interlocutory application should not have been brought. This submission was made on two grounds. First, it was said under the express provisions of the Corporations Act 2001 (Cth) (the Act), the court had no jurisdiction to make the order sought by the plaintiff and properly advised, the plaintiff should have known the application had no chance of success. Second, it was said Lottah's assets were not at risk and there was no basis for the appointment of a provisional liquidator. Further, it was said the plaintiff acted unreasonably in not accepting an undertaking from the defendants. It was submitted this undertaking should have been accepted and the interlocutory application would then have been unnecessary.
The defendants put their position this way. Lottah's creditors had on 30 June 2022 resolved that Lottah enter into a DOCA and the DOCA was executed on 21 July 2022. This application was initiated a week later. The primary relief which the plaintiff was seeking was to have the DOCA set aside. It would then follow Lottah would be placed into liquidation. The defendants say, and I accept, that almost all of the costs incurred by the second and third defendants involve the plaintiff's interlocutory application for the appointment of a provisional liquidator. In preparation for the hearing of the interlocutory process, the defendants filed an affidavit of Mr Darin which ran to 671 pages and detailed submissions. Even a cursory glance at Mr Darin's affidavit and the submissions is enough to indicate considerable effort was involved to prepare for the interlocutory hearing.
It was the defendants' position that the interlocutory application was doomed to fail because the court did not have jurisdiction to appoint provisional liquidators. Reference was made to s 444E of the Act, which on the face of it precludes the making of a winding up application while a DOCA is in force. In its interlocutory application, the plaintiff relied on s 472(2) of the Act. The plaintiff submits it is doubtful whether that section has any application to companies the subject of deeds of company arrangement. But, it was submitted, even if it does, there is a jurisdictional pre‑condition - that is to say a winding up application in relation to the company must have been filed.
As the interlocutory process was not heard and determined, it is inappropriate for me to express a concluded view as to the strength or otherwise of the defendants' argument. But, on the face of it at least, the defendants' position has considerable merit. It is a fundamental feature of the deed of company arrangement process that while a deed is in operation, steps cannot be taken to wind up the company the subject of the deed. It must necessarily follow that appointment of a provisional liquidator is not relief which is available. A provisional liquidator is, according to the wording of the Act, a liquidator who is appointed provisionally. It follows then, if a liquidator cannot be appointed to a company the subject of a deed, then it is not open to the court to appoint a provisional liquidator.
It was the defendants' position the plaintiff late in the day realised the difficulty it was facing and it was for that reason that amended interlocutory processes were filed. The amendment sought to appoint a special purpose administrator to Lottah. Once again, it is not appropriate for me to express a concluded view as to whether in the circumstances of this case, a special purpose administrator would have been appointed. But it would seem unlikely that such an appointment would have been made when the only purpose to be served was to investigate the appropriateness or otherwise of the administrator's actions in entering into the DOCA. It was the defendants' position that even if the last minute amendment had been allowed, the interlocutory application was still doomed to fail.
The plaintiff's position was summarised in their submissions as to costs lodged 2 September 2022. The plaintiff said (at [48]):
As to whether the Plaintiff acted reasonably in conducting the proceedings, the Plaintiff submits that it did. This is demonstrated by, among other things:
(a)the bases upon which the Originating Application and the Interlocutory Application were brought (as set out above);
(b)the primary basis for bringing the Interlocutory Application was to avoid, if appropriate to do so, the harsh consequence of the Originating Application (i.e. an immediate winding up of Lottah) in circumstances where the Plaintiff considered that the Second and Third Defendants' deficient investigations and reporting required further analysis;
(c)the Plaintiff's efforts to allay its concerns as to the potential for the status quo of Lottah to be disturbed (including but not limited to seeking undertakings from the directors) which was the driving force for the urgency surrounding the Interlocutory Application;
(d)upon being notified of an alleged jurisdictional issue in respect of the appointment of a provisional liquidator (which the Plaintiff does not concede), the Plaintiff took immediate steps to amend the Interlocutory Application in any effort to allay that concern, and notify the Second and Third Defendants of the reasons why those amendments had been made but noting that the substance of the proposed appointment was undisturbed;
(e)the Plaintiff offering to indemnify the provisional liquidator/special purpose administrator for the costs incurred in respect of that appointment;
(f)the Plaintiff's attempts to adjourn the Interlocutory Application upon:
I.being satisfied that the status quo of Lottah was, as far it could be, preserved; and
II.being notified that the proponent contribution payable under the DOCA (DOCA Contribution) may not be paid within the timeframe stipulated in the DOCA (which would have the potential effect of terminating the DOCA and Lottah being automatically placed into liquidation).
The principles relating to indemnity costs have been considered at length in a number of different authorities. Perhaps the most useful summary is found in Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Korda [2015] WASCA 101 (S) [11] ‑ [17]. For the purposes of this case, the question is whether the application was brought and continued in circumstances in which the applicant, properly advised, should have known that the application had no chance of success. Put another way, the applicant pressed what, on a proper consideration, should have been seen to be a hopeless case.
This is one of those rare cases where I am satisfied an award of indemnity costs is appropriate. It is very difficult to see how the plaintiff, properly advised, could have persisted with this action. To succeed, the plaintiff would have had to persuade the court it was appropriate to wind up a company which was subject to a DOCA. No matter which way the matter is approached, whether it is on the basis of the interlocutory application as first filed, or on the basis of the proposed amended interlocutory applications, the action could not succeed. It represented an attack on the fundamental principle of the DOCA regime. Furthermore, counsel for the defendants from the first drew the attention of the plaintiff and their legal advisors to the difficulties they faced. In the circumstances, I am satisfied an award of indemnity costs is justified. In conformity with the orders sought by the second and third defendants, the order will be as follows:
(1)The plaintiff is to pay the second and third defendants' costs:
(a)of the interlocutory application (including the costs of the directions hearing) on an indemnity basis; and
(b)of the originating process on a party and party basis.
(2)The costs are to be taxed if not agreed.
(3)If the plaintiff fails to make payment of the second and third defendants' costs, the second and third defendants have liberty to apply for orders making the plaintiff's liquidators personally liable for the second and third defendants' costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MM
Associate
9 MARCH 2023
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