In the matter of Great Adventures Pty Ltd (A.C.N. 009655921); Ebbage, J.J. v Stout, K.J.
[1991] FCA 527
•16 JULY 1991
Re: JOHN JOSEPH EBBAGE
And: KENNETH J. STOUT; AUSTRALIAN SECURITIES COMMISSION; REEF VENTURES PTY.
LTD.; REEF MANAGEMENT PTY. LTD.; REGISTRAR OF BUSINESS NAMES
No. Q G3004 of 1991
FED No. 527
Corporations - Costs
COURT
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)
CATCHWORDS
Corporations - sale by receiver - position of liquidator - application for extension of time.
Costs - joinder of interested parties by Court - whether applicants should bear those costs or a proportion of them - taxation of costs.
Corporations Law, s.1321
Corporations Rules, O.71, r.100
Federal Court Rules, O.62, r.19
HEARING
BRISBANE
#DATE 16:7:1991
Counsel for the applicant : Mrs P.M. Wolfe
Solicitors for the applicant : Gadens Ridgeway
Counsel for the first respondent : Mr F.G.A. Beaumont QC
with Mr I.R. Molloy
Solicitors for the first respondent : Higgins Teale
Counsel for the second respondent : Mr A.M. Daubney
Solicitors for the second respondent : Australian Securities
Commission
Counsel for the third and Mr E.J.P.F. Lennon QC
fourth respondent : with Mr P.L. O'Shea
Solicitors for third and Clarke and Kann
fourth respondent :
Solicitors for fifth respondent : Registrar of Business Names
ORDER
1. The applicant pay the second respondent's costs of and incidental to the application, to be taxed.
2. The application for extension of time be refused.
3. The proceedings be dismissed.
4. The applicant pay the costs of the first, third, fourth and fifth respondents, to be taxed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This application was begun on 16 April 1991 seeking declarations whose general effect would, if granted, have been to destroy the validity of what was done by way of changing a company's name. The purpose of the application which was brought by the company's liquidator is not as clear as it might be, but, in legal terms, is to reaffirm or establish the proposition that the receiver had made an error in the sale of company assets. The receiver, Mr Stout, had sold company assets, including goodwill and (I have no doubt) the names in which the company had carried on business, and the application challenged steps taken in the course of doing so.
The application sought directions that the Australian Securities Commission amend its records in accordance with the declarations made and all necessary and consequential orders and directions that the Court might deem appropriate to require that to be done. The arguments which are now before me have come down to two: one, the question of costs and another, an application for an extension of time.
As originally filed, the application did not describe itself as an appeal, but the statement of claim said that the orders sought were orders under s.1321 of the Corporations Law. The point was taken, admittedly rather late, that the application had been filed late because Order 71 Rule 100 of the Corporations Rules imposes a time limit which, it is common ground, was not observed. The applicant, on the point being taken, has applied for an extension of time, but has not otherwise pursued the relief sought in the application. The basis upon which that decision was taken, it seems to me, was that quite recently, the receiver, Mr Stout, took steps to remedy whatever deficiencies there might be thought to have been in his past proceedings; there were plainly some deficiencies.
Looking at the matter broadly, the case is one in which the liquidator, having sued, has now decided not to pursue the proceeding and, prima facie, as I have said, one would expect the costs to follow that event - that is, the abandonment of the proceeding.
However, the matter is complicated somewhat by two circumstances. One is that there has to be dealt with at the outset, as it seems to me, an application for an extension of time, and the other is the position of the third and fourth respondents, which I will mention shortly.
It is true that the point about the time was taken rather late, but nevertheless, the rules are there, and they should, prima facie, have been complied with. Order 71 Rule 100(2) says:
"Unless the Court grants an extension of time to commence the appeal, an application under section 1321 must be commenced by filing the application within 21 days of the act, omission or decision from which the appeal is brought",
and on its face it appears to be mandatory. From that point of view, it seems to me the absence of a pleading of the time point may be thought to be peripheral, and the matter was one which it was for the applicant to take up with the Court. It has now done so, and I am satisfied on the evidence that the application for an extension of time should not be granted.
When the matter was first before the Court on 8 May 1991, an inquiry was made by me as to what was the commercial point of the case, and a rather broad answer was given, namely to protect the assets of the company for distribution to the unsecured creditors.
In fact, it appears from the evidence that the applicant's view is that the business names in question are not assets of the company which can be distributed to the unsecured creditors. He says, in effect, that what the receiver did in the course of the sale was technically defective and could not have been done properly without the liquidator's co-operation. When asked by Mr Beaumont QC what was the price of co-operation, he at first, in effect, declined to say, and ultimately suggested that a sum in excess of $200,000 was what he had in mind.
The nature of the case, then, really seems to have been this: that the receiver having sold (and the sale was completed on 31 January last) assets of the company including businesses of the company and including their names, the liquidator has come to the Court with a view to establishing that what should be described as technical deficiencies existed in the procedure followed. He made it clear, I thought, that he did not say that the names were not the receiver's to sell, nor did he say that he had any interest in the names. He simply said that the law was such as to make it difficult, if not impossible, for the receiver to sell without the co-operation of the liquidator, and there was a price on the co-operation.
As things presently stand, he does not any longer pursue the case, and it seems to me clear, in those circumstances, that an extension of time should not be granted. I say that for two reasons: first of all because the case is not being pursued; and secondly, because the case is not, I think, one of a kind which should be encouraged.
Mrs Wolfe has argued on behalf of the liquidator that he had an interest in ascertaining the boundaries of the respective powers of the liquidator and receiver, and that it was in the public interest that these matters should be unravelled. While that may be so, from the practical point of view the point which has been taken is, in essence, technical and one must question whether or not the liquidator had any perfectly clear idea in his own mind what he was about. Certainly it seemed to take him a long time in cross-examination to explain for what reason the case was brought.
The argument advanced on behalf of the liquidator about costs has taken a number of detailed points concerning the way in which matters proceeded. The course which the receiver took was not perfect. One can see that at certain points, he might have done something slightly better advised, but there is certainly nothing in the argument to suggest that the receiver has misconducted himself or done anything which would justify refusing him his costs.
A more difficult point is the joinder of the third and fourth respondents. That was done by the Court over the objection of the applicant, and the reason the third and fourth respondents were joined was to be able to put forward the arguments which needed to be advanced on behalf of the purchasers of the businesses.
A large sum of money was paid for the assets which were sold by the receiver, including the names, and it is said, and I quite accept, that the purchasers were concerned when an attack seemed to be made upon this important aspect of the transaction - namely, the treatment of the name "Great Adventures".
The argument which Mrs Wolfe has advanced has naturally emphasised that the joinder of the purchasers' interest was over the objection of the applicant. It does not, of course, follow that for that reason the applicant should not run some risk as to costs. The law relating to declaratory relief is clear: those who have a substantial interest in resisting the relief sought should, prima facie, be joined. It seems to me plain that the purchasers were in the category of persons who should have been joined. It is true that both the purchaser and a transferee from the purchaser were joined, but that does not seem to make any substantial difference because it did not add, as I see it, anything at all to the costs.
I had been inclined to make some special order to reflect the important fact that, to a considerable extent as it seems to me, the third and fourth respondents' interests were adequately represented by the receiver, Mr Stout. To a very large extent the interests of those parties were identical. Mr Lennon QC has contended, correctly I think, that in some respects their interests diverge, but, by and large, they had much the same case to advance.
The course which one could take to reflect the commonality of interest between the first respondent, on the one hand, and the third and fourth on the other, might include making a limited order for costs in favour of the third and fourth respondents - for example, a proportion of costs. It seems to me, however, that the matter is too complex to be dealt with in that way.
During the course of argument reference was made to Order 62 Rule 19 which reads in part as follows:
"On every taxation the taxing officer shall allow all such costs charges and expenses as appear to him to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party, but, except as against the party who incurred them, costs shall not be allowed which appear to the taxing officer to have been incurred or increased -
(a) through over-caution, negligence or misconduct ..."
or through other circumstances. Order 62 Rule 19, then, lays down the important rule that the taxing officer is to allow, and only to allow, costs which are necessary or proper for attaining justice or maintaining or defending the rights of a party. It may well be that on examination of the third and fourth respondents' bill, the taxing officer is of the view that only part of the items claimed should be allowed, on the ground that to a greater extent than they did, the third and fourth respondents should have relied upon the first respondent's efforts.
However, it is impractical without a detailed examination of the papers for me to form a view as to the extent if any to which the third and fourth respondents' costs should be reduced by reason of the rule which I have mentioned, and I have been persuaded that the proper course is to leave that question to the taxing officer.
I do so conscious of the fact that it is a difficult task for him to perform, and I do so despite my preference for making broad orders for costs, rather than orders which will involve the taxing officer and the parties in a detailed examination of the facts. It seems to me that there is no practicable course here other than to leave that whole matter to the taxing officer.
Mrs Wolfe has also drawn attention to the cross-claim which was made by the third and fourth respondents and suggested, in effect, that something should be allowed in respect of that.
I do not see that there is anything of any consequence to be said about it, because it is merely a pleading, and it does not seem to have affected the course of the proceedings in any significant way. To look at the matter again, broadly, as I think one should if possible, the Court is here to resolve commercial disputes, among other sorts of disputes, and there is nothing wrong with bringing a commercial claim before the Court which depends entirely on technical matters and in which the applicant seems to be taking a very technical stance. Sometimes such cases succeed.
Again looking at the matter broadly, there is no doubt that the receiver, Mr Stout, was entitled to sell what he did sell, and Mr Ebbage, the applicant, does not suggest otherwise. He simply says that there were errors in procedure and that without his co-operation in certain fairly formal steps Mr Stout could not achieve his purpose. I think if one brings that sort of case, one must realise that there can be some risk as to costs. Indeed, attention was drawn to that matter when the case came before the Court on 8 May when I said "it makes you wonder whether unless there is some more specific point in it, whether the whole thing is worth while, because it is obviously likely to be a pretty expensive exercise, isn't it?" (p 44-45).
The case was pursued, has now been abandoned, and it seems to me that the usual order should be made. As to the second respondent and the fifth respondent there is no dispute. I have made an order for costs in favour of the second respondent, and it is not suggested that I should not make one in favour of the fifth respondent. Despite the arguments which have been advanced to the contrary, I propose to make orders in favour of the other respondents also. That is, I will order that the applicant pay the costs of the first, third, fourth and fifth respondents, and the proceedings be dismissed.
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