Ian L Struthers, Liquidator of P.A.C.I. Pty Ltd (No. 3)

[2005] NSWSC 1113

Reported Decision: 56 ACSR 238
64 NSWLR 392
(2006) 24 ACLC 201

New South Wales

Supreme Court

CITATION:	Ian L Struthers, Liquidator of P.A.C.I. Pty Ltd (No. 3) [2005] NSWSC 1113 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	26, 27 September 2005
JUDGMENT DATE :	27 September 2005
JUDGMENT OF:	Brereton J

CATCHWORDS:	CORPORATIONS - COSTS - non-party - whether power to order costs against non-party to proceedings under Corporations Act 2001 (Cth) - proceedings under this Act - "party to the proceedings" - relationship between Corporations Act 2001 (Cth) s1335(2) and Civil Procedure Act 2005 (NSW) s 98 and Uniform Civil Procedure Rules 2005 (NSW) r 42.27 - whether examinees party to proceedings.
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW), s 98 Contractors' Debts Act 1897 (NSW) Corporations Act 2001 (Cth), ss 596A, 596B, 597, 1330, 1335(2), 1337H, 1337J, 1337K, 1337M, 1337N Supreme Court (Corporations) Rules, r 11.10 Uniform Civil Procedure Rules 2005 (NSW), rr 6.24, 6.26, 42.27 Workplace Relations Act 1996 (Cth), s 237(1)
CASES CITED:	Application of Struthers, liquidator of P.A.C.I [2005] NSWSC 864 Australian Forest Managers Limited (in liq) v Bramley (1996) 65 FCR 13, 19 ACSR 398 Australian Security Estates Pty Limited v Bluecrest Holdings Pty Limited (in liq) [2002] NSWSC 491 Blake v Norris (1990) 20 NSWLR 300 Collins v Marshall Pty Ltd (1955) 92 CLR 529 Construction Enterprises Pty Limited v Lafarg Plasterboard Pty Limited [2002] NTSC 21 Construction Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2000) 233 CLR 645 Cooke v Goodhew (1989) 30 IR 388 Critchley v Australian Urban Investment Ltd [1979] VR 374 Felton v Mulligan (1971) 124 CLR 367 Forrest v Kelly (1991) 105 ALR 397 Gregory v Phillip Morris Ltd (1987) 74 ALR 300 Grout v Gunnedah Shire Council (1995) 129 ALR 372 Herbert Berry Associates Ltd v Inland Revenue Commissioners [1977] 1 WLR 1437 Hood v Barrs and Heriot [1897] AC 177 Independent Education Union of Australia v Canonical Administration (1998) 157 ALR 531 Concrete Constructions Pty Limited v Barnes (1938) 61 CLR 209 Jones v Jones (1898) 19 LR (NSW) (Law) 43 O'Shea v O'Shea and Parnell; Ex parte Tuohy (1890) 15 PD 59 R v B [1972] WALR 129 Re Charles Henry Pty Limited (in liq) [2002] FCA 343 Re Healey, Re Inquiry into Election in Australian Workers' Union (SA Branch) (1992) 40 IR 110 Re Markham (1880) 15 Ch D 1 Re Polites, ex parte Hoyts Corp (1991) 173 CLR 78 Re Wridgemont Display Homes Pty Limited (1992) 39 FCR 193, 117 ALR 479 RSE Com Partners v Ad'Tel Digital Systems [2004] NSWSC 299 UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Limited [1999] 1 VR 204 Viner v Australian Building Construction Employees and Builders' Labourers' Federation (1981) 38 ALR 550 Webster v Mount Lewis Developments Pty Limited (1940) 40 SR NSW 483 Australian Forest Managers Ltd (in liq) v Bramley (1996) 19 ACSR 398 Witness v Marsden (2000) 49 NSWLR 429
PARTIES:	Ian L Struthers, Liquidator of Project Management, Architecture and Construction Interior Pty Ltd (Plaintiff) Jong Moon Lee (Examinee) Song Sook Lee (Examinee) Bum Mo Lee (Examinee)
FILE NUMBER(S):	SC 3668 of 2005
COUNSEL:	Mr C Hodgekiss SC & Ms J A Soars (Plaintiff) Mr M B J Lee (Examinees)
SOLICITORS:	Hunt & Hunt Lawyers (Plaintiff) Hancocks Lawyers (Examinees)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Thursday 27 September 2005

3668/05 Ian L Struthers, Liquidator of Project Management, Architecture & Construction, Interior (P.A.C.I.) Pty Limited

JUDGMENT (ex tempore) (revised 17 November 2005)

1 HIS HONOUR: On 24 August 2005 the plaintiff, Ian Lawrence Struthers, who is the liquidator of the company PACI Pty Limited, and who is in the course of conducting examinations under Corporations Act, ss 596A and 596B, pursuant to examination summonses issued on 30 June 2005, obtained orders for the issue of warrants under Supreme Court (Corporations) Rules, r 11.10, for the arrest and bringing before the Court of Song Sook Lee, Jong Moon Lee and Bum Mo Lee, who had failed to attend for examination on 23 August 2005, having been summoned to do so.

2 The background to that application is for present purposes sufficiently set out in my judgment delivered on 24 August 2005 [Application of Struthers, liquidator of PACI [2005] NSWSC 864]. Song Sook Lee and Jong Moon Lee were duly arrested, brought before the Court and examined. Bum Mo Lee obtained a discharge of the warrant for his arrest, having undertaken to the Court to attend for examination a day or two later. The subsequent procedural history is sufficiently recorded for present purposes in my judgment given on 7 September 2005.

3 The liquidator now seeks, by amended interlocutory process filed on 26 September 2005, an order that the Lees pay the liquidator's costs of the application for the warrants and thrown away by their non-attendance at the examination, such costs to be payable on an indemnity basis, and, if it be necessary, for reasons which will become apparent, that the Lees be joined as respondents for the purpose of having costs orders made.

4 Mr Hodgekiss of Senior Counsel, who appears for the liquidator, relies on Supreme Court (Corporations) Rules, r 11.10(2)(b), and alternatively Uniform Civil Procedure Rules r 42.27, as authorising the costs order. Mr M B J Lee, who now appears for the Lees, submits that Corporations Act, s 1335(2) poses an insuperable obstacle to hearing a costs order against the Lees. The question to be decided at this stage therefore is whether, as Mr Lee contends, s 1335 applies in the present context so as to produce the result that no costs order can be made against the Lees.

5 The parties have argued this question, pertaining as it does to the power or jurisdiction to make a costs order in the relevant circumstances, as a preliminary question before addressing the merits of the application. The question involves four main issues: first, is the proceeding in which the costs order is sought, one to which s 1335 applies; secondly, if so, are the Lees parties to that proceeding; thirdly, if they are not, what is the effect of s 1335 in that situation; and, fourthly, if the effect is that no costs order can be made, then should they be joined so that a costs order can be made against them.

6 I turn to the first of those issues, which is whether the proceeding in which a costs order is sought is a proceeding to which s 1335 applies.

7 Section 1335(2) is in the following terms:

The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs.

8 The section is concerned with "a proceeding … under this Act", that is to say the Corporations Act. Mr Lee has drawn my attention to the judgment of the High Court of Australia in Construction Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2000) 233 CLR 645 where, in the context of the Workplace Relations Act (Cth) s 237(1) - which provided that a party to a proceeding in a matter arising under that Act shall not be required to pay costs incurred by any other party except in limited circumstances – it was said that a “matter” is properly described as one arising under an enactment where the right or duty in issue in the proceeding is one that owes its existence to the enactment. Referring to Re Polites, ex parte Hoyts Corp (1991) 173 CLR 78 [at 93], the Court pointed out that an application for a writ of mandamus for compliance with a duty imposed on the Industrial Relations Commission under the Industrial Relations Act was a matter arising under the Act, because the duty in question owed its existence to the Industrial Relations Act.

9 From this, at first sight, it might be thought that, because the duty to attend an examination pursuant to an examination order under Corporations Act, ss 596B and 597, was created by the Corporations Act, therefore a proceeding designed to secure compliance with that duty would be also a matter arising under the Corporations Act. However, such reasoning would incorrectly apply to the concept of a "proceeding under this Act" a statement which related to "a proceeding in a matter arising under this Act". There is a well-established distinction between a proceeding under an act on the one hand, and a proceeding in a matter arising under an act on the other. In Felton v Mulligan (1971) 124 CLR 367, Menzies J said [at 382] that it was to be observed:-

… that there is a difference between a matter arising under a law, and a matter involving the interpretation of a law. A matter may involve the interpretation of a law without arising under that law. Thus, for instance, if upon a claim for damages for negligence at common law, it became necessary to interpret some statutory provision imposing some duty upon the defendant, the litigation would involve the interpretation of the statutory provision but would not arise under it. A matter arises under a law when it is necessary in litigation to determine whether that law confers a right or affords a defence which is an issue in the litigation. A matter arises under the law of the parliament when in a proceeding it is necessary that there should be a decision upon a claim made by one of the parties to the litigation which is based upon that law. It is to be observed that there a difference between a "proceeding" arising under a law and a "matter" arising under a law. A "proceeding" arises under a law only when it is authorised by that law: see Collins v Marshall Pty Ltd (1955) 92 CLR 529, 537. A "matter" need not be a "proceeding"; it may be part of a proceeding, eg, a defence that the law authorising the proceeding is unconstitutional. So it is that a matter may arise under a law made by the parliament in a proceeding which does not arise under that law.

10 This passage was cited with approval in the Federal Court of Australia in Independent Education Union of Australia v Canonical Administrators (1998) 87 FCR 49, 157 ALR 531 [at 542], where Ryan J said, "A 'matter arising under the Act' is different from a proceeding which may be brought under the same Act."

11 In Concrete Constructions Pty Limited v Barnes (1938) 61 CLR 209, the High Court considered the Contractors' Debts Act 1897 (NSW), and in particular whether an action at law, in respect of which a certificate of the judgment might, under the Act, be registered in another court, was a proceeding under the Act. Latham CJ said, “The proceeding at law was not a proceeding under the Act, it was a proceeding under a contract which was enforceable by reason of the common law or some statute other than the Act. The Act did not provide for this proceeding at law. It assumes that proceeding, and then provides for a proceeding which depended upon the granting of a certificate which may be used against a third person."

12 The same Act was considered by the Full Court of this court in Webster v Mount Lewis Developments Pty Limited (1940) 40 SR (NSW) 483. With reference to what Latham CJ had said at Concrete Constructions v Barnes, Jordan CJ [at 487] pointed out that the proceeding at law mentioned in s 3 was not a proceeding under the Act: “No doubt, it is the Act which by s 3 enables the making of an application in a proceeding at law for a certificate of the cause of the debt, but it would be straining language to treat an application for such a certificate as the institution of a proceeding under the Act”.

13 In Australian Forest Managers Ltd (in liq) v Bramley (1996) 19 ACSR 398, Lindgren J was considering s 1335(2) of the Corporations Law, the immediate and identical predecessor of the present section under consideration. In holding that a proceeding was a proceeding "under the Law", his Honour identified that the Statement of Claim pleaded breaches of obligations imposed by various divisions of the Law, that the cause of action as pleaded against three of the four respondents was one created by the Corporations Law, and that that cause of action was an essential part of the case intended to be made against the fourth respondent. His Honour concluded: "In those circumstances I have no doubt that the proceeding is one 'under' the Law for the purposes of sub-section 1335(2) of the Law".

14 These cases lead me to conclude that proceedings will be "under this Act" if they are authorised by, or provided for, or in respect of a cause of action created by, the Corporations Act.

15 But what is meant by the reference to "any proceeding" in s 1335(2)? In Blake v Norris (1990) 20 NSWLR 300, Smart J said [at 306]:

In Stroud's Judicial Dictionary 5th ed, vol 4, at 2029-35 some 55 instances are given of the use of the word 'proceeding' or 'proceedings' in legislation, rules of court or documents having legal significance. The meaning depends on the context in which the word is used. In some cases it is equivalent to "an action" whereas in others it may mean a step in action. Sometimes it may include a counter-claim. The Oxford Companion to Law (1980) by Professor Walker states at 1002 and 1003 that "proceedings" is sometimes used as including, or meaning, an action or prosecution, and sometimes as meaning a step in an action. The word 'proceeding' is capable of such a variety of meaning that dictionary definitions as to its ordinary or natural meaning are not of much use. They tend to highlight the number of meanings which the word can bear. Any assistance as to its meaning has to be derived from the statutory context and the objects of the legislation in question.

16 In Grout v Gunnedah Shire Council (1995) 129 ALR 372, Moore J in the Industrial Relations Court of Australia said [at 383] that one meaning of the word 'proceeding' which was suggested as its primary technical legal meaning was the invocation of the jurisdiction of a court by a process other than a writ, it being described as an 'action' if jurisdiction were invoked by writ [see also Herbert Berry Associates Ltd v Inland Revenue Commissioners [1977] 1 WLR 1437, 1446; Forrest v Kelly (1991) 105 ALR 397, 408; and Re Healey; Re Inquiry into Election in Australian Workers' Union (SA Branch) (1992) 40 IR 110, 118].

17 While it might be said that the word "proceeding" is capable of variable and varying meanings, one starts from the position that, while the distinction between a proceeding and an action has not survived, generally speaking, a proceeding means the invocation of jurisdiction by an initiating process, rather than an interlocutory step in a proceeding so instituted, although sometimes it is capable of and does bear the latter meaning. This is consistent with at least a slight inclination in favour of viewing “proceeding” as relating to a litigation as a whole, and not to individual interlocutory steps in that litigation.

18 But, as Smart J said in the passage which I have cited, the word takes meaning from the context in which it appears. The context here is the Corporations Act, and in particular Pt 9.6 of that Act, which is entitled “Proceedings”. Section 1330(1) authorises ASIC to intervene "in any proceeding" relating to a matter arising under the Act, and by sub-section (2) ASIC is taken to be a party to the proceeding when its intervenes. That, to my mind, more supports the view that "a proceeding" is an entire litigation, rather than an interlocutory step in that litigation.

19 Section 1335(1) provides for an order to be made for security for costs where a corporation is a plaintiff "in any action or other legal proceeding". Accompanying the words "in any action", the reference to "other legal proceeding" picks up the old dichotomy between actions instituted by writs and proceedings instituted by other processes, and supports the view that "proceeding" is a reference to an entire litigation and not a step in it.

20 More significant assistance is derived from some of the provisions in Pt 9.6A, although a different part of the Act, entitled "Jurisdiction and Procedure of Courts". Sub-division C deals with the transfer of proceedings between courts. Section 1337H(2) provides for the transfer either of "the relevant proceeding" or “an application in the relevant proceeding" to another Court, in the context of a transfer by the Federal Court to a State or Territory Supreme Court. Curiously, the same distinction is not drawn in s 1337J, where the transferor court is the Family Court, or 1337K, where the transferor court is a lower court of a State or Territory; but the result of this anomaly is only that, whereas the Federal Court or a State Supreme Court can transfer an application in a relevant proceeding without transferring the entire proceeding, the Family Court or a lower State court can transfer only the entire proceeding. Section 1337M maintains the distinction between "a proceeding" and "an application", as does s 1337N.

21 These statutory provisions reinforce the initial inclination to view "a proceeding" for the purposes of s 1335(2) as an entire litigation, and not a step in that litigation. I conclude that for the purposes of s 1335(2) "any proceeding" is a reference to the whole substantive litigation and not to individual interlocutory applications in it, let alone individual procedural steps such as the issue of a subpoena in those proceedings.

22 But that is not to say that every separate step in a litigation always will be part of the one proceeding. An application to have a party dealt with for what is traditionally called "criminal" contempt (as distinct from “civil” contempt) is regarded as a separate proceeding. In O'Shea v O'Shea and Parnell; Ex parte Tuohy (1890) 15 PD 59, Cotton and Lopes LJJ expressed the view that contempt proceedings, while commenced by way of motion in an existing proceeding, are criminal in nature and separate and distinct from the proceeding which gave rise to the contempt. Their Lordships said that to initiate proceedings against the alleged contemnor, it was appropriate to take out a motion in the existing proceeding naming the alleged contemnor. Cotton LJ distinguished contempts which are not of a criminal nature - for example, disobedience of an order made in some civil proceeding to do or abstain from doing something, when a motion to commit was bought as “really only a procedure to get something done in the action, and has nothing of a criminal nature in it" - from a proceeding in which it was sought to punish a contemnor for interfering with the course of justice.

23 Cotton LJ said of the latter (criminal contempt):-

It is convenient that the notice should be entitled in the cause to show to what matter the motion to commit refers, but what gives the Court the power to act is the fact the appellant has done something to prevent the course of justice .... That is clearly a contempt of Court of a criminal nature .... And when you concede that it is a wrongful act, you find that, although it is headed in the divorce action, it is not a proceeding in the action - not a proceeding for the purpose of obtaining anything in the action, but an application to punish an attempt to induce the jury not to try the case properly ….

24 That view has been acted on in many cases since [see R v B [1972] WALR 129; Jones v Jones (1898) 19 LR (NSW) (Law) 43; Critchley v Australian Urban Investment Ltd [1979] VR 374; Viner v Australian Building Construction Employees and Builders' Labourers' Federation (1981) 38 ALR 550, 552-6; 56 FLR, 27-32; Cooke v Goodhew (1989) 30 IR 388; Gregory v Phillip Morris Ltd (1987) 74 ALR 300, 308]. These cases illustrate that for present purposes there is a distinction to be drawn between a motion to commit a person for a "civil" contempt such as a breach of injunction on the one hand, such as was described in O'Shea as "really only a procedure to get something done in the action", and an application to have a person punished for "criminal" contempt, which though entitled as a motion in the original proceeding, is not a proceeding for the purpose of obtaining anything in the action, but separate and distinct from it.

25 In the present case, the warrants were obtained to aid the examination order by securing attendance of the examinees, and not to punish for disobedience. They were not akin to a criminal contempt process.

26 I should finally refer to Hood v Barrs and Heriot [1897] AC 177. In that case, the House of Lords held that an appeal by a woman from a judgment in an action in which she was a defendant was not "a proceeding" within the meaning of the Married Women's Property Act, so that an order could not be made under s 2 of that Act for payment of costs of the opposing party out of her separate property because the section applied only to an action or "other litigation" initiated by the woman, and notwithstanding that it was she who initiated the appeal in that action, she had not initiated the action. Thus even an appeal was not considered to be a separate proceeding, but a step in the proceeding.

27 That decision, with the others to which I have referred, and with the construction which I have attributed to “proceeding” under s 1335(2), produce the conclusion that there is only one proceeding in this case. The application for the issue of a warrant was not a separate proceeding within the litigation, but part of the one entire examination proceeding. It was "only a procedure to get something done" in the examination, and not for a separate and a distinct purpose.

28 The substantive examination proceeding is unarguably a proceeding under the Corporations Act. The examination proceedings are authorised by either s 596A or 596B of the Corporations Act. The obligation to attend is imposed by s 597 of that Act. The liquidator's entitlement to conduct an examination is created, and the power to conduct an examination is provided, by those sections. The examination is authorised, and provided for, by the Act. It is based on a statutory entitlement created by the Act.

29 As to the application under rule 11.10 (for issue of the warrants), it is true that the Supreme Court (Corporations) Rules are made under the authority of the Supreme Court Act and not under the Corporations Act. However, the application is made, albeit pursuant to those Rules, in aid of the examination authorised by and under the Corporations Act. It is made for the purpose of proceedings under the Corporations Act. It is made simply to secure the attendance at Court of an examinee for the purpose of examination under that Act. It is not comparable to a proceeding for criminal contempt: no contempt charge has been brought and no separate remedy or relief is sought against the examinees, simply that they be brought to Court as they had originally been summoned to attend. Far from being a separate and distinct procedure from the examination proceedings, it is, as I have said, “really only a procedure to get something done” in that proceeding.

30 In argument there was discussion of the analogy of a motion, in proceedings such as an oppression suit which would undeniably be proceedings under the Corporations Act, for summary dismissal of those proceedings pursuant to the rules of Court. The motion for summary dismissal is authorised by the rules of Court. But it cannot be that whether the proceedings were dismissed after a final hearing on the merits or on a motion for summary dismissal could make any difference as to whether s 1335 governed the costs of those proceedings. This, I think, illustrates that an ancillary process provided for by the rules of Court is not to be seen, for the purposes of s 1335(2), as amounting to a separate proceeding.

31 Accordingly, I conclude that the application for the issue of the warrants was part of the examination proceeding. The whole proceeding is one under the Corporations Act. It follows that s 1335(2) is applicable to the proceeding in respect of which a costs order is sought by the liquidator.

32 I turn then to consider whether the Lees are parties to those proceedings.

33 In RSE Com Partners v Ad'Tel Digital Systems [2004] NSWSC 299, Austin J considered whether a costs order could be made against an examinee who had arguably joined in an application by her husband, also an examinee, to set aside an examination summons. His Honour said [at 18]:

I have real doubts as to the meaning of the word "party", in circumstances where examination summonses are issued under the Supreme Court (Corporations) Rules . I shall assume that Mrs Favell is properly described as a party to the proceeding so that the Court is permitted to make an order against her notwithstanding Pt 52A r 4. Nevertheless, it seems to me that the Court ought not make an order against her in the circumstances obtaining here.

34 Thus his Honour was prepared to assume, without deciding, that an examinee who had made an application to the Court and who had been named at one stage in a subsequent consent order as a respondent, was a party, while expressing "real doubts" that that was the case. As his Honour determined not to make a costs order in any event, this "assumption" was plainly not part of his Honour's decision.

35 The joinder of a person as a party in legal proceedings is not something which happens by accident. In order to be a party, one must either be named in the originating process, or joined pursuant to order of the Court at some later stage. It is not something which lends itself to happening other than by a formal step.

36 A witness who is served with a subpoena to give evidence in proceedings is not regarded as a party to those proceedings. If that witness fails to attend in answer to a subpoena and an application is made for the issue of a bench warrant for the apprehension of the witness under Civil Procedure Act, s 97, the witness does not thereby become a party to the proceeding. This position is reflected in UCPR, r 44.27, which acknowledges that persons who, having been ordered to attend or produce documents, fail to do so, are not parties but may nonetheless be the subject of costs orders.

37 And if such a witness appears by counsel and applies to set aside the subpoena, the witness even then does not thereby become a party. In Witness v Marsden (2000) 49 NSWLR 429, Heydon JA, as his Honour then was, reviewed authorities relating to the standing of a witness to apply to set aside a subpoena, and the appellate standing of such a witness whose application in relation to a subpoena had failed. In the numerous authorities to which his Honour refers, there is no suggestion that by making such an application the witness becomes a party to the proceeding. In particular, his Honour said [at 68]:

The law permits non-parties to apply for leave to appeal from orders affecting them. Thus in Re Markham (1880) 16 ChD 1, a potential beneficiary under a will who was not party to administration proceedings was granted by the Court of Appeal leave to appeal despite having not been a party to the cause.

and [at 75], in considering the entitlement of a witness to have counsel to appear on such an application:

But the common course of modern practice, as indicated in several of the cases cited above, is uniformly in favour of permitting the recipient of the subpoena ad testificandum to appear by counsel. Whether that recipient appears by counsel or not, the recipient appears not to be a party, and the outcome of the present application for leave to appeal is not affected by the fact that Mr Stitt was appearing as amicus curiae as distinct from appearing as counsel for the Witness.

38 The cases to which Heydon JA referred are not limited to applications in respect of subpoenas to give evidence or subpoenas to produce documents but include, for example, orders to attend for examination where evidence had been taken on commission, and analogous procedures. An examination summons is analogous to a subpoena. Both are orders of the Court, commanding attendance for the purpose of giving evidence or producing documents. Both may, in appropriate circumstances, be set aside on the application of the witness or the examinee. Both may be enforced, in aid of the proceedings, by bench warrant or analogous process without invoking the Court’s power to deal with contempt. And in both cases, the witness or the examinee does not thereby become a party to the proceeding in which the subpoena or the summons is issued.

39 In my opinion, therefore, the Lees were and are not parties to any relevant proceeding.

40 That then brings me to the third issue, which is the effect of s 1335(2) in those circumstances.

41 In Re Wridgemont Display Homes Pty Limited (1992) 39 FCR 193, 117 ALR 479, Jenkinson J held that because the general power conferred by Federal Court of Australia Act 1976, s 43, to make costs orders (which extends to costs orders against third parties) was subordinated to a contrary provision in "any other" Commonwealth Act, and because the jurisdiction conferred by the then Corporations Law of Victoria had to be exercised in conformity with s 1335(2) of that Law, so that a costs order could be directed only to those who were parties to the proceeding, the power which the Court otherwise had under s 43 to make a costs order against a person other than a party to the proceedings was excluded. His Honour suggested that, in an appropriate case, it would be possible to join certain persons associated with companies as parties pursuant to Federal Court Rules, O. 71 r 10(4), but even if it were otherwise appropriate, that course is not available in this case, because there is no suggestion that any of the Lees fall within the category of persons who would be covered by that provision or its equivalent.

42 In Australian Forest Managers Limited (in liq) v Bramley (1996) 65 FCR 13, 19 ACSR 398, Lindgren J said that the construction adopted by Jenkinson J, far from being "plainly wrong", was correct. Again, as in this case, the power given by Federal Court Rules, O 71 r 10(4), was not applicable. The essential part of Lindgren J's reasoning was that jurisdiction conferred on the Court by the Corporations (Victoria) Act 1990, carried with it and was subject to the terms of s 1335(2). His Honour said [at ACSR 405] that it was impermissible to construe the conferral of jurisdiction with respect to “matters arising under” the Corporations Law unaccompanied by the provision in s 1335(2) with respect to the costs of “any proceeding … under the Law”, which was “an inseverable part of the grant of jurisdiction”. His Honour concluded [at ACSR 408]:

The terms of subs 1335(2) of the Law are mandatory: once a proceeding before a court is seen to be one "under" the Law, subs 1335(2) requires the costs of the proceeding to be borne by a party or parties. The court's discretion relates only to how the costs are to be so borne. Such terms are inconsistent with an exercise of the power given by s 43 FCA Act to order a non-party to pay costs. The excepting words in subs 43(2) of the FCA Act are apt to refer to, inter alia, provisions of such a nature.

43 In UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Limited [1999] 1 VR 204, however, Chernov J came to a different view. His Honour thought that s 1335(2) did not fall within the words "otherwise expressly provided ... by any other Act" in s 24(1) Supreme Court Act (Victoria) (which was the equivalent of Federal Court of Australia Act, s 43). His Honour identified the real question as being whether s 1335(2) evinced an intention to limit the operation of s 24(1) of the Supreme Court Act. Considering its legislative history, his Honour concluded that it was not so intended. Having reviewed the history of the relevant legislation leading to s 1335(2), first in England and secondly in Victoria (where it had no early history, as his Honour explained, because it was unnecessary where the Judicature Act had applied), his Honour turned thirdly to New South Wales, where the section had its origin. His Honour showed that the predecessor of s 1335(2) was Companies Act 1936 (NSW), s 365(2) which gave this Court in its equitable jurisdiction a discretion to direct how the costs of any proceeding before it under the Companies Act should be borne by “such party to the proceeding”. His Honour concluded that the sub-section was intended to be an enabling provision, and not one which imposed restrictions on the jurisdiction and discretion of the Court:-

It seems fairly clear that this sub-section was an enabling provision intended to give the Supreme Court in New South Wales a similar discretion to that which was given to English Courts in 1890 and to the Victorian Supreme Court in 1928.

44 This conclusion was supported by reference to the Second Reading Speech of the Minister on the introduction of the Companies Bill in 1936, in which the Minister had said: "Clause 365(2) giving the Court discretion as to costs is not in the English Companies Act as the Courts have the same discretion under the English Judicature Acts."

45 Chernov J noted the subsequent history of the section, with its eventual incorporation in the Uniform Companies legislation of 1961. Even then, the learned authors of the 1965 edition of the seminal work of Wallace and Young, Australian Company Law and Practice, recognised that it was intended to give a judicial discretion to this Court in its equitable jurisdiction, and thus dealt with a difficulty existing in this State which did not exist elsewhere. These considerations led his Honour to the conclusion that s 1335(2) did not fall within the exceptive words of s 24(1) of the Supreme Court Act (Victoria), and did not operate to limit the power of that Court to award costs against a non-party to the proceeding even where it was one "under this Law" for the purposes of s 1335(2).

46 In Australian Security Estates Pty Limited v Bluecrest Holdings Pty Limited (in liq) [2002] NSWSC 491, Bergin J in this Court concluded [at 65] that the Court was precluded from making a costs order against a liquidator personally, except under SCR Pt 52A, r 41(5) – which was not available as the liquidator, being a liquidator in a voluntarily winding up, was not one of the Court's officers. Her Honour referred to Wridgemont and to Australian Forest Managers, from which her Honour cited substantial passages. However, her Honour does not appear to have been referred to the judgment of Chernov J in UTSA, which succeeded those earlier cases.

47 Mr Hodgekiss has drawn attention to the Corporations Act, s 5E, which provides that the Corporations legislation is not intended to exclude or limit the concurrent operation of any law of a State or territory, although this is subject to subs (4) which provides that it does not apply if there is a direct inconsistency between the Corporations legislation and that law.

48 In Construction Enterprises Pty Limited v Lafarg Plasterboard Pty Limited [2002] NTSC 21, Master Coulehan in the Supreme Court of Northern Territory held that there was no inconsistency between s 1335(2) on the one hand, and Order 63.21 of the rules of the Supreme Court of Northern Territory - which authorises the making of wasted costs orders against lawyers who cause costs to be incurred improperly or without reasonable cause or to be wasted – on the other. The Master said that s 1335 and Order 63.21 were concerned with different subject matter, the first in substance with costs of proceedings under the Corporations Act, and the second in substance with the conduct of legal practitioners.

49 In Re Charles Henry Pty Limited (in liq) [2002] FCA 343, Ryan J in the Federal Court of Australia made an order that an examinee pay the applicant's costs thrown away by reason of the examinee’s non-attendance at an examination, including the costs of and incidental to the application for costs, in circumstances where his Honour had issued a warrant, the examinee having failed to attend in answer to the summons. His Honour relied on r 11.10(2)(b) of the Federal Court (Corporations) Rules 2000, which is identical to r 11.10(2)(b) of the Supreme Court (Corporations) Rules. His Honour does not appear to have been referred to s 1335 and the cases which have considered it.

50 At first sight, the suggestion that the Commonwealth Parliament has enacted a provision to detract from the existing costs powers of Courts in which it invests jurisdiction to deal with proceedings under the Corporations Act is a surprising one. But were it not for the judgment of Chernov J in UTSA, despite these initial impressions about s 1335, I would unquestionably have followed Wridgemont and Australian Forest Managers, particularly given Lindgren J's strong endorsement of Wridgemont, and also given that those cases had been followed in this Court by Bergin J. However, in circumstances where there has been, since Australian Forest Managers, what impresses me as a compelling analysis of the history and purpose of the section by Chernov J - the benefit of which does not appear to have been afforded to Bergin J when her Honour came to consider the point - and where Ryan J, albeit without reference to the authorities, has adopted an opposite approach, I consider that I am at liberty to give effect to my own views.

51 I agree with Chernov J that s 1335 should not be construed as a limiting provision, but as an enabling one. Its history shows that it was intended to confer a jurisdiction or a power to make costs orders when there was doubt as to the existence that power, at least in the equitable jurisdiction of this Court in this State. If there were no s 1335(2), the Court would not be without power to make costs orders in proceedings under the Act; it would have all its powers under the Supreme Court Act and the Civil Procedure Act. Section 1335 was not intended to limit such other powers to make costs orders as the Court already enjoyed, but to supplement them. In my opinion, the current provisions ought not be taken as intended to exclude the power of Courts under, for example, Civil Procedure Act, s 98, and UCPR, r 42.27, to make costs orders which are designed to protect the processes of the courts and the integrity of those processes and the procedural rights of parties who litigate in those courts.

52 This approach is consistent, although not dependent upon, that authorised by Corporations Act, s 5E. It accords with the result reached by Ryan J in Re Charles Henry Pty Limited, though his Honour was not required to examine the authorities and the statute to reach that result. Viewed this way, s1335(2) is not to be seen as the Court's source of jurisdiction to make costs orders in Corporations matters, but as a supplemental grant, in addition to all such costs powers as Courts invested with jurisdiction under the Corporations Act already otherwise have.

53 Accordingly, I propose to follow the decision of Chernov J in UTSA that s 1335(2) does not exclude powers which courts exercising jurisdiction under the Corporations Act otherwise have to make costs orders against persons other than parties to the proceeding under the Corporations Act.

54 Lest I be wrong in that conclusion, I should turn to the final question, which is whether in any event the Lees should be joined as parties to make them amenable to a costs order.

55 UCPR, r 6.26, provides as follows:

(1) Except to the extent to which these rules expressly provide, a party may not join another person as a party to any proceedings for the purpose of making an application for costs against the other person.

(2) This rule does not apply:
(a) if the other person would otherwise be a proper party to the proceedings, or
(b) if the party joins the other person by means of a cross-claim in respect of a claim for costs against the party.

56 That means that it would only be appropriate to join the Lees for the purposes of an application for costs if they would otherwise be a proper party to the proceedings.

57 UCPR r 6.24, provides as follows:

(1) If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party.

(2) Without limiting subrule (1), in proceedings for the possession of land, the court may order that a person (not being a party to the proceedings) who is in possession of the whole or any part of the land (whether in person or by a tenant) be added as a defendant.

58 For the reasons I have given when describing the analogy of examination proceedings with subpoenas and proceedings concerning subpoenas, the Lees were not and are not necessary parties. There was no need for them to be joined as parties for the purposes of having a warrant issued, any more than there is a need to have a witness joined as a party for the purpose of having a bench warrant issued. It would follow that they would be joined only for the purpose of having a costs order made against them, which is prohibited by r 6.26. In my opinion, it would not be permissible, nor appropriate if it were permissible, to join the Lees for the purpose of making a costs order against them.

59 It follows that in my opinion the proceeding before this Court for the examination of the Lees is a proceeding under the Corporations Act for the purposes of s 1335(2). The application for the issue of a warrant for their arrest was a part of that proceeding to which s 1335(2) applies. The Lees are not parties to that proceeding and cannot - and if they can, ought not - be joined as parties for the purposes of being made amenable to a costs order. However, in the context of this case, s 1335(2) does not have the effect of excluding the power of the Court to make a costs order under UCPR, r 42.27, against persons who are not parties to the proceedings.

60 It follows that I should then proceed to hear argument on the merits of the costs applications.

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