Garra Water Investments Pty Ltd (in Liq) v Ourback Yard Nursery Pty Ltd and Anor (No 2)

[2012] SASC 137

Supreme Court of South Australia

(Civil)

GARRA WATER INVESTMENTS PTY LTD (IN LIQUIDATION) v OURBACK YARD NURSERY PTY LTD & ANOR (No 2)

[2012] SASC 137

Judgment of The Honourable Justice Gray

14 August 2012

PROCEDURE - COSTS - RECOVERY OF COSTS

Application by the plaintiff for an order for costs of the proceedings.

Held: Application granted - the plaintiff succeeded on the issues argued and was entitled to its costs to be taxed on a party/party scale.

Trustee Act 1968 (Vic) s 63, referred to.
Garra Water Investments Pty Ltd (In Liquidation) v Ourback Yard Nursery Pty Ltd & Anor [2012] SASC 44, considered.

GARRA WATER INVESTMENTS PTY LTD (IN LIQUIDATION) v OURBACK YARD NURSERY PTY LTD & ANOR (No 2)
[2012] SASC 137

Civil

GRAY J.

1. On 26 March 2012, judgment was delivered in the within proceedings.[1] 

   [1]    Garra Water Investments Pty Ltd (In Liquidation) v Ourback Yard Nursery Pty Ltd & Anor [2012] SASC 44.

2. The plaintiff, Garra Water Investments Pty Ltd (In Liquidation), has now sought an order for costs of the proceedings.  It was submitted that the plaintiff had been successful in the litigation.  Attention may be drawn to the following observations appearing in the reasons for judgment:[2]

   The liquidator is entitled, as was conceded, to his reasonable expenses in and about the winding up of the plaintiff and is entitled to be indemnified from the company’s assets as trustee for that purpose.  From the date of liquidation until 25 November 2008, those costs and expenses include those properly and reasonably incurred by the liquidator in the administration of the plaintiff as trustee.  From 25 November 2008 until the winding up is concluded, they include the proper and reasonable costs and expenses of the liquidator in the administration of the plaintiff as a bare trustee.  Those activities extend to the finalisation of creditors’ claims against the plaintiff and steps taken to preserve the assets of the plaintiff to meet those claims.  The indemnity also extends to the costs and expenses of the liquidator in the finalisation of the liquidation.  The plaintiff is entitled to a lien over the assets for the purposes of giving effect to the indemnity.  The plaintiff is entitled to trace those assets. 

   It is not possible on the information presently before the Court to determine the proper and reasonable expenses that are the subject of the indemnity and that matter should be referred to a Master for determination. 

   It was pointed out that the parties had agreed that the Court be requested to first address the proper construction of the deed of indemnity and that the assessment of the plaintiff’s monetary entitlement be deferred. 

   [2]    Garra Water Investments Pty Ltd (In Liquidation) v Ourback Yard Nursery Pty Ltd & Anor [2012] SASC 44, [48]-[49].

3. In the proceedings, the defendant, Ourback Yard Nursery Pty Ltd, initially contended that the plaintiff could only claim its proper and reasonable costs until a new trustee of the trust deed was appointed on 22 October 2008.  However, during the course of the hearing, the defendant accepted that this period should be extended to 25 November 2008 when notice of the appointment of the replacement trustee was given to the plaintiff. 

4. The defendant submitted that once replaced as trustee, the plaintiff was obliged to seek directions from the Court as to any dealings that it may have with trust property pursuant to section 63 of the Trustee Act 1968 (Vic).  In the course of my reasons I rejected this submission and, in particular, reasoned:[3]

   The terms of section 63 provide a discretion in the Court to consider an application by trustees.  There is nothing in the wording of section 63 that obliges a trustee to seek the authorisation from the Court.  The defendant referred to the decision of Re Baker deceased; Rouse v Attorney-General for Victoria.[4]  A review of this decision does not disclose support for the proposition that the trustee is obliged to seek authorisation under section 63 in circumstances where the trustee has power to act in accordance with the terms of the particular trust deed or according to the general law. 

   [3]    Garra Water Investments Pty Ltd (In Liquidation) v Ourback Yard Nursery Pty Ltd & Anor [2012] SASC 44, [25].

   [4]    Re Baker deceased; Rouse v Attorney-General for Victoria [1961] VR 641.

5. The liquidator of the plaintiff had to consider the right of indemnity and to take appropriate steps to protect that right.  Further, the evidence revealed that debts of the business the subject of the trust and the liability of the plaintiff remained outstanding for some considerable time. 

6. Following the delivery of judgment, the defendant terminated its solicitor’s instructions.  I agreed to a request for an extension of time for the defendant to make submissions on the question of costs.  On 6 July 2012, an outline of argument containing the following was emailed to my chambers:

   The Liquidator did not resolve issues immediately and incurred unnecessary Costs and expenses.

   The Liquidator withdrew $20,950.10 from our ANZ overdraft account, it was Borrowed money, which should have not been available to the Liquidator as It was not the Companies money.

   The Company was solvent, the only reason it was liquidated was because of bad advice.  The way the Liquidator behaved in the matter of the liquidation, could have been resolved quickly and expenses would have been avoided.

   If they had conducted themselves properly, as the company could have paid all its debts shortly after Liquidation.

   We are to make a counter claim against the Legal Representatives.

7. There is nothing in the material before me which evidences that the liquidator did not act appropriately.  The matters raised in the outline of 6 July 2012 do not provide any proper basis on which to deny the plaintiff its costs. 

8. In my view, the plaintiff succeeded on the issues argued and is entitled to its costs.  I order that the defendant pay the plaintiff’s costs of the proceeding thus far to be taxed on a party/party scale.