Great Southern Managers Australia Ltd (in Liq) in Its Capacity as Responsible Entity of the Managed Investment Schemes Listed in Schedule 1 v Thackray
[2010] WASC 138 (S)
•15 JUNE 2010
GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 1 -v- THACKRAY [2010] WASC 138 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2010] WASC 138 (S) | |
| 15/06/2010 | |||
| Case No: | COR:35/2010 | 12 & 21 MAY, 1 SEPTEMBER 2010 | |
| Coram: | LE MIERE J | 25/05/10 | |
| 22/10/10 | |||
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 1 GREAT SOUTHERN OLIVES COMPANY LTD (IN LIQ) GREAT SOUTHERN OLIVE HOLDINGS PTY LTD (IN LIQ) ANDREW JOHN SAKER MARTIN BRUCE JONES DARREN GORDON WEAVER JAMES HENRY STEWART GREAT SOUTHERN OLIVE PROCESSING PTY LTD (IN LIQ) JAMES GERARD THACKRAY ANTHONY GREGORY MCGRATH COLIN MCINTOSH NICOL SIMON ANDREW READ THE GROWERS LISTED IN SCHEDULE 8 OF THE APPLICATION BENDIGO AND ADELAIDE BANK |
Catchwords: | Costs Costs of objectors Objectors' costs not to be determined until after the Rights Proceeding |
Legislation: | Rules of the Supreme Court 1971 (WA), O 66 Supreme Court Act 1935 (WA), s 37(1) |
Case References: | ASIC v GDK Financial Solutions Pty Ltd (in liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580 Coad v Wellness Pursuit Pty Ltd [2009] WASCA 68; (2009) 71 ACSR 250 Corporate Systems Publishing Pty Ltd v Lingard [2009] WASCA 158 Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21 (S) Great Southern Managers Australia Ltd (in liq) in its Capacity as Responsible Entity of the Managed Investment Schemes listed in Schedule 1 v Thackray [2010] WASC 138 Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516 Quatro Ltd v Argo Investments Ltd [1999] VSC 231; (1999) 32 ACSR 480 Re Arrowfield Group Ltd (1995) 17 ACSR 649 Re NRMA Ltd [2000] NSWSC 82; (2000) 33 ACSR 595 Re Timbercorp Securities Ltd (in liq) [2009] VSC 510; (2009) 74 ACSR 626 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DECISION : 22 OCTOBER 2010 FILE NO/S : COR 35 of 2010 MATTER : Great Southern Managers Australia Limited (ACN 083 825 405) (In Liq) BETWEEN : GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 1
- First Plaintiff
GREAT SOUTHERN OLIVES COMPANY LTD (IN LIQ)
Second Plaintiff
GREAT SOUTHERN OLIVE HOLDINGS PTY LTD (IN LIQ)
Third Plaintiff
- ANDREW JOHN SAKER
Fourth Plaintiff
MARTIN BRUCE JONES
Fifth Plaintiff
DARREN GORDON WEAVER
Sixth Plaintiff
JAMES HENRY STEWART
Seventh Plaintiff
GREAT SOUTHERN OLIVE PROCESSING PTY LTD (IN LIQ)
Eighth Plaintiff
AND
JAMES GERARD THACKRAY
First Defendant
ANTHONY GREGORY MCGRATH
Second Defendant
COLIN MCINTOSH NICOL
SIMON ANDREW READ
Third Defendants
THE GROWERS LISTED IN SCHEDULE 8 OF THE APPLICATION
BENDIGO AND ADELAIDE BANK
Fourth Defendants
Catchwords:
Costs - Costs of objectors - Objectors' costs not to be determined until after the Rights Proceeding
(Page 3)
Legislation:
Rules of the Supreme Court 1971 (WA), O 66
Supreme Court Act 1935 (WA), s 37(1)
Result:
Application dismissed
Category: B
(Page 4)
Representation:
Counsel:
First Plaintiff : Mr R W Douglas
Second Plaintiff : Mr R W Douglas
Third Plaintiff : Mr R W Douglas
Fourth Plaintiff : Mr R W Douglas
Fifth Plaintiff : Mr R W Douglas
Sixth Plaintiff : Mr R W Douglas
Seventh Plaintiff : Mr R W Douglas
Eighth Plaintiff : Mr R W Douglas
First Defendant : No appearance
Second Defendant : No appearance
Third Defendants : No appearance
Fourth Defendants : Mr D Marsh
Bendigo and Adelaide Bank : No appearance
Solicitors:
First Plaintiff : Middletons
Second Plaintiff : Middletons
Third Plaintiff : Middletons
Fourth Plaintiff : Middletons
Fifth Plaintiff : Middletons
Sixth Plaintiff : Middletons
Seventh Plaintiff : Middletons
Eighth Plaintiff : Middletons
First Defendant : No appearance
Second Defendant : No appearance
Third Defendants : No appearance
Fourth Defendants : Clarendon Lawyers
Bendigo and Adelaide Bank : No appearance
Case(s) referred to in judgment(s):
ASIC v GDK Financial Solutions Pty Ltd (in liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580
Coad v Wellness Pursuit Pty Ltd [2009] WASCA 68; (2009) 71 ACSR 250
(Page 5)
Corporate Systems Publishing Pty Ltd v Lingard [2009] WASCA 158
Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21 (S)
Great Southern Managers Australia Ltd (in liq) in its Capacity as Responsible Entity of the Managed Investment Schemes listed in Schedule 1 v Thackray [2010] WASC 138
Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516
Quatro Ltd v Argo Investments Ltd [1999] VSC 231; (1999) 32 ACSR 480
Re Arrowfield Group Ltd (1995) 17 ACSR 649
Re NRMA Ltd [2000] NSWSC 82; (2000) 33 ACSR 595
Re Timbercorp Securities Ltd (in liq) [2009] VSC 510; (2009) 74 ACSR 626
(Page 6)
1 LE MIERE J: On 7 April 2010 the plaintiffs caused to be issued an interlocutory process for relief in which they sought various orders and directions. The application was subsequently amended. On 27 May 2010 I made orders in relation to the plaintiffs' application. The orders that I made, the reasons for making those orders, and the background to the matter are set out in Great Southern Managers Australia Ltd (in liq) in its Capacity as Responsible Entity of the Managed Investment Schemes listed in Schedule 1 v Thackray [2010] WASC 138. The orders made included an order that the costs of the proceeding be reserved. By interlocutory process filed on 29 July 2010 the fourth defendants named in sch 1 to the interlocutory process and represented by Clarendon Lawyers, who I will refer to as the Applicants, now seek an order that the liquidators pay the Applicants' costs of the proceeding in the following terms:
The liquidators of the first, second, third and eighth plaintiffs pay:
(a) the reserved costs in this proceeding, and
(b) the costs of this application,
of the Applicants on a full indemnity basis in accordance with Clarendon Lawyers' standard terms of engagement from the fund established from the completion of either or both of the Sumich Asset Sale Agreement and the Kailis Asset Sale Agreement.
Legal principles in relation to costs orders
2 Section 37(1) of the Supreme Court Act 1935 (WA) provides relevantly that subject to the provisions of the Act and to the rules of court the costs of and incidental to all proceedings in the court shall be in the discretion of the court or judge and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid. Order 66 r 1(1) of the Rules of the Supreme Court 1971 (WA) provides that subject to the express provisions of any statute and of the rules the costs of and incidental to all proceedings shall be in the discretion of the court but, without limiting the general discretion conferred on the court by the Act, and subject to O 66, the court will generally order that the successful party to any action or matter recover his costs. The discretion is very wide. The only fetters are those provided elsewhere in the Act and the rules, or any other Act and the fact that the discretion must be exercised judicially: Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516, [39] (Steytler P).
(Page 7)
3 Although the court has a wide discretion to make what order as to costs the justice of the case requires, a proper and judicial exercise of that discretion will generally involve a consideration of the outcome of the case and the relative success achieved by each party. Those matters are relevant because a party who turns out to have unjustifiably either brought another party before the court, or given another party cause to have recourse to the court to obtain his rights, should be required to recompense the other party in costs.
4 Order 66 r 4(1) provides that where property is the subject of any action or matter, or where any question arising therein will affect any right or claim to property, the court may make an order that the costs of any party may be recovered out of the property with or without recourse against any other party, provided that no such order shall be made unless the court is satisfied that the party seeking the order had a genuine interest to protect, or that it was reasonable in the circumstances that he should appear.
5 Order 66 r 4 provides that the court may in the circumstances specified order that the costs of a party be recovered out of a fund, but the rule does not require such an order. Furthermore, the rule provides that an order for the payment of costs out of a fund shall not be made unless the court is satisfied the party seeking the order had a genuine interest to protect or that it was reasonable in the circumstances that he should appear. That will ordinarily require the court to consider whether to make an order for the payment of costs out of a fund after it has been determined whether the party has an interest in the fund and whether it was reasonable in all the circumstances for the party to take the position it did in the relevant proceedings.
6 In this case the proceedings are not relevantly completed. It has not been determined whether or not the Applicants have an interest in the relevant fund. That will be determined in the Rights Proceedings.
Orders for costs in favour of 'Objectors'
7 In their written submissions the Applicants submitted that they have acted in the role of objectors. The Applicants refer to a number of authorities where costs have been ordered in favour of an 'objector'. They include orders for costs in favour of objectors on a company's application for confirmation of a capital reduction. In Quatro Ltd v Argo Investments Ltd [1999] VSC 231; (1999) 32 ACSR 480 Hansen J held that the court has a discretion on costs in such proceedings. His Honour said that the discretion is to be exercised to do what is just in the particular
(Page 8)
- case and that is done by paying close regard to the facts and circumstances of the case at hand. Those facts and circumstances include the reasonableness of the conduct of the company and an objector in relation to the reduction proposal and the confirmation hearing, and the substance or lack of substance of the point or points raised by an objector. In Re Arrowfield Group Ltd (1995) 17 ACSR 649 an objector was awarded his costs of objecting to a reduction of capital even though he was unsuccessful in his objections.
8 The cases referred to by the Applicants also include cases in which a fund that belongs to a secured creditor may be charged with another person's costs. In ASIC v GDK Financial Solutions Pty Ltd (in liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580 Finkelstein J observed that it is a long-settled rule that the costs incurred for the benefit of all persons having an interest in an asset (usually a fund that is subject to various claims) must be borne by the fund. The rule was confirmed and discussed by the Court of Appeal in Coad v Wellness Pursuit Pty Ltd [2009] WASCA 68; (2009) 71 ACSR 250.
9 In Re NRMA Ltd [2000] NSWSC 82; (2000) 33 ACSR 595 Santow J considered an application for orders convening scheme meetings and to approve an explanatory statement for a proposed scheme of arrangement pursuant to s 411 of the Corporations Law. Several objectors to the scheme opposed the orders. At the commencement of the application it was submitted by the objectors that it was appropriate for the court to make orders or directions that the companies contribute monies towards the legal costs of the objectors or provide an indemnity to the objectors by which they would in effect guarantee to pay the objectors' costs on an indemnity basis and not seek any order for costs against the objectors whatever may happen. Santow J declined to make the orders. Santow J stated at [45]:
Whether the costs of objectors on their objection should be met by the applicant scheme company has been the subject of a number of cases, but all of them were in relation to cost applications made at the conclusion of the convening hearings. The principles which emerge from the cases show why that must be so. I will attempt to distil their effect in these terms:
(i) The ordinary rule is that the scheme companies pay the objector's costs and do not suffer cost orders against them.
(ii) However, this is subject to the objections not being frivolous or without substance but rather such as to be properly and justifiably advanced, even if unsuccessfully. I would add that even sensible objections should be capable of being advanced with reasonable
- economy of time, consistent with the summary nature of a s 411(1) application.
- (iii) These principles reflect the fact that the scheme procedure unavoidably must provide an independent court forum on two separate occasions - for convening and then to approve the scheme. The court will often be assisted by having a contradictor at either stage. It must not be forgotten that the end point of most schemes, if adjudged sufficiently fair and achieving the statutory majorities, is compulsory acquisition of the member's property and the court is no rubber stamp in that process.
(iv) Where there is a clear indication that objectors are using the tactics of technical and artificial objection so as to stall a scheme of arrangement for their own purposes, the courts will not hesitate to make costs orders against objectors to the extent warranted; those cost orders may even be indemnity cost orders in appropriate cases.
(v) Since assessment of the objections cannot be made in advance, cost orders should not be made in advance either.
10 The authorities referred to by the Applicants offer some guidance to the exercise of the discretion. However, the discretion in this case must be exercised having regard to the facts and circumstances of this case.
Applicants' contentions
11 The Applicants put forward five reasons why their costs should be paid from the fund generated by the completion of the Sumich Asset Sale Agreement and the Kailis Asset Sale Agreement:
1. The Applicants have been funded by contributions from financial planners with clients affected by the scheme.
2. Submissions made by the Applicants have prevented the extinguishment of all growers' rights, not just the Applicants.
3. The Applicants' submissions have preserved the proceeds of the sale and purchase deed to allow for their just and equitable distributions.
4. As a result of the Applicants' submissions there is now a significant prospect of a greater return to all growers.
5. Accordingly, the actions of the Applicants have been undertaken for the benefit of all growers and their costs should be paid from the common fund.
(Page 10)
Plaintiffs' contentions
12 The plaintiffs object to the orders sought principally because it seeks a special costs order prior to the determination of the entitlement of any grower to the fund. The plaintiffs submit that if, as they contend, the growers have no entitlement to the Fund, the special costs order will pay the costs of a party with no entitlement and thereby effect a confiscation of property belonging to the true owners of that property without any foundation in the principles of the law of costs. The plaintiffs submit that the proper time to determine entitlement to costs is at the conclusion of the proceedings, when the merits of the parties' competing claims have been determined by the court. The plaintiffs submit that the authorities cited by the Applicants do not support such a departure from that principle and such a departure would be inconsistent with the rationale for costs orders adopted by this court and by other Australian and English courts.
13 The plaintiffs referred to Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21 (S). In that case the plaintiff sought orders that the trustees pay both the plaintiff's costs and the beneficiary defendants' costs of the action out of the trust fund. The plaintiffs relied upon O 66 r 4 of the Rules of the Supreme Court 1971 (WA) and submitted that in a claim arising out of a trust the successful applicants' costs are usually paid from the trust fund. The plaintiffs also pointed to the fact that they succeeded in establishing breaches of trust; that the consent defence was, they submitted, only partially successful; and the fact that the trustees' defence was amended at a late stage. Beech J did not accept the plaintiffs' submissions that the trustees should pay the costs of the plaintiff and the beneficiary defendants. His Honour said:
In substance, this litigation involved a contest between the plaintiffs, on the one hand, and the beneficiary defendants, on the other. The central issues related to the existence, enforceability, conditionality, construction and effect of the January 2002 Agreement. In my judgment, the beneficiary defendants have been substantially successful in the contest. A beneficiary whose claim of breach of trust fails on the ground that the beneficiary had consented to the breach of trust should not necessarily expect that the costs of the action will be paid by the trustee. Given the equal beneficial entitlements of the three parties, an order that the costs of the action be paid by the trustee defendants would, in substance, have the result that two-thirds of those costs would be borne by the beneficiary defendants. To my mind, that would not be a just exercise of the costs discretion in this case. Rather, the plaintiffs should pay the beneficiary defendants' costs of the action. However, because the plaintiffs had a measure of success in certain respects, I would not order that the plaintiffs pay the whole of the beneficiary defendants' costs …[48].
(Page 11)
14 An appeal to the Court of Appeal was dismissed. The Court of Appeal agreed with the reasoning of Beech J: Corporate Systems Publishing Pty Ltd v Lingard [2009] WASCA 158.
15 The plaintiff submitted that none of the authorities referred to by the Applicants, except for Re Timbercorp Securities Ltd (in liq) [2009] VSC 510; (2009) 74 ACSR 626, state or imply a principle that an award of costs may be made prospectively or in circumstances prior to a decision being made in respect to the parties entitlement to having an indemnity out of the relevant fund. The plaintiff submitted, and I accept, that this case is relevantly different from Re Timbercorp Securities. In Re Timbercorp Securities the growers by virtue of the terms of their subleases had a specific entitlement to occupy the land upon termination of the head leases. The liquidators conceded, and Robson J ruled, that this right had a value and that the growers had an entitlement to some part of the fund. In this case the plaintiffs deny that the growers have any entitlement to the fund or had any entitlement to the property from which the fund has been generated.
Proceedings on 21 May 2010
16 The parties made various submissions concerning the conduct of the hearing on 21 May 2010. The Applicants submitted, in effect, that they were successful in having orders made that established a fund rather than the growers' rights being extinguished. The growers' rights, if any, to the fund will be determined in the Rights Proceedings. The Applicants submit, in effect, that they were successful in their objections to the orders sought by the plaintiffs being made on 21 May 2010.
17 The plaintiffs submit that the orders that were made on 27 May 2010 resulted from serious allegations made by senior counsel for the Applicants on 21 May 2010 which had not previously been made and it is not clear whether the Applicants maintain those allegations in the Rights Proceedings.
18 I find it unnecessary to determine those issues. It is sufficient that I observe that at the hearing on 21 May 2010 senior counsel for the Applicants made serious allegations concerning the propriety of the conduct of the liquidators. The nature and extent of those allegations is now a matter of debate between the parties. However, the conduct of the liquidators will be in issue in the Rights Proceedings. The court's determination in relation to those issues is at least potentially relevant to the exercise of the court's discretion in relation to the costs of the proceedings to date.
(Page 12)
Nature of proceedings
19 The Applicants say that the application for judicial approval under s 511 Corporations Act 2001 (Cth) is now completed and the liquidator has been given approval to extinguish the growers' rights and the growers are entitled to their costs as objectors in that proceeding in any event. The orders made on 27 May 2010 permitted the sales under the Asset Sale Agreements to proceed and to preserve the claims and rights of the growers by turning their rights and interests in the assets to rights and interests in the fund generated by the sale of the assets. The central controversy between the parties is whether the growers had any right or interest in the assets the subject of the sale agreements. That will be determined in the Rights Proceedings.
Conclusion
20 It is premature to determine who should bear the Applicants' costs of the proceedings to date. The Applicants have been successful insofar as their intervention has prevented the growers' rights being wholly extinguished. The proceeds of the Asset Sale Agreements will constitute a fund. The rights, if any, of the growers to any part of that fund will be determined in the Rights Proceedings. If the growers are wholly unsuccessful in the Rights Proceedings then it may not be just to award them the costs of the proceedings to date. That is because the Applicants will have incurred those costs in pursuing, or seeking to maintain, rights which it will have been found do not exist. Furthermore, the Rights Proceedings will determine the allegations made by the Applicants concerning the conduct of the liquidators. The court was unable to determine those allegations at the hearing on 21 May 2010 and that led to the making of the orders on 27 May 2010 rather than the orders originally sought by the plaintiffs. If the allegations made by the Applicants are found to be wholly unfounded then it may not be just for the Applicants to be awarded their costs of the proceedings to date. Whether or not the Applicants had any right or interest in the assets the subject of the Asset Sale Agreements and whether or not the allegations made by the Applicants at the hearing on 20 May 2010 are wholly or partly made out is relevant to the exercise of the discretion whether the Applicants' costs should be paid out of the fund generated by the sale of the assets.
21 This case is different from cases concerning objections by minority shareholders to schemes involving capital reduction. In this case it has not yet been established that the Applicants, or growers, had any right or interest in the assets the subject of the sale agreements or have any right to, or interest in, the fund consisting of the proceeds of the asset sale
(Page 13)
- agreements. It is premature to determine who should bear the Applicants' costs of the proceedings to date until it has been established in the Rights Proceedings whether or not the Applicants, or growers, have any right to or interest in the assets the subject of the asset sale agreements and hence any interest to protect by the orders made on 27 May 2010.
22 The Applicants' application for an order that the liquidators pay their costs of the proceeding to date should be dismissed. It follows that the Applicants' application that their costs be paid on a full indemnity basis in accordance with Clarendon Lawyers standard terms of engagement should also be dismissed.
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