In the matter of Iris Diversified Property Pty Ltd (in liquidation)

[2019] NSWSC 1887

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Iris Diversified Property Pty Ltd (in liquidation) [2019] NSWSC 1887
Hearing dates:	On the papers
Decision date:	22 December 2019
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Applicants pay the liquidators’ costs of and incidental to their Interlocutory Process filed 2 October 2019 and their Amended Interlocutory Process filed 14 October 2019, as agreed or as assessed
Catchwords:	COSTS – costs of unsuccessful application to set aside examination summonses and associated applications.
Legislation Cited:	- Uniform Civil Procedure Rules 2005 (NSW) r 42.1
Cases Cited:	- Re Iris Diversified Property Pty Ltd (in liquidation) [2019] NSWSC 1593
Category:	Costs
Parties:	The Owners – Strata Plan 84741 (Plaintiff) Iris Diversified Property Pty Ltd (in liq) (First Defendant) Henry Peter McKenna (Second Defendant) Wassim Arnaout (First Applicant) Rodney Paul Hawkins (Second Applicant) Iris Diversified Investments Pty Ltd (Third Applicant) Iris Group Management Pty Ltd (Fourth Applicant) Iris Hotel Business Pty Ltd (Fifth Applicant) Iris Hotel Group Pty Ltd (Sixth Applicant) IDI SPV7 Pty Ltd (Seventh Applicant) Brendan Warren Jones (Eighth Applicant) Christopher Palmer and Liam Thomas Bailey as liquidators of Iris Diversified Property Pty Ltd (in liq) (Respondents)
Representation:	Counsel: J R Clarke SC/E L Beechey (Applicants) R D Glasson (Respondents)   Solicitors: McCullough Robertson (Applicants) Macpherson Kelly (Respondents)
File Number(s):	2017/359162 (003)

Judgment

1. By my judgment delivered on 18 November 2019 ([2019] NSWSC 1593) I declined to set aside orders for examinations or orders for production made by a Registrar, although the orders for production were narrowed in the course of the hearing and I noted that the liquidators would retain independent solicitors in respect of the examinations, rather than continuing to use the solicitors also engaged by a substantial creditor in respect of the examination. I also dismissed a claim by the Applicants seeking to assert legal professional privilege over a substantial range of documents. I ordered that I reserved the costs of the application at the Applicants’ request.

2. In submissions, the Applicants recognised the general rule that costs follow the event but submit that rule may be displaced where it appears to the Court that some other order should be made. The Applicants submit that the usual order should be varied in this case, on the basis that each party had a “measure of success” on the application to set aside the examinations and the determination of that application made the determination of the privilege application unnecessary. The liquidators respond that nothing in the Applicants’ submissions warrants departure from the general rule that costs follow the event or would warrant some other order being made under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW). The liquidators point out that, obviously enough, the event was the dismissal of the Applicants’ Interlocutory Process and Amended Interlocutory Process. They also submit that the Applicants were substantially, if not wholly, unsuccessful on the applications, including as to the privilege issue on which, as I had noted in the judgment, their application to set aside the examination summonses “substantially turned”.

3. I am unable to accept the Applicants’ submission that each party had a “measure of success”, if that is intended to suggest something in the nature of a draw, where the examinations were not set aside and the Applicants’ failure in a substantial part of their claim for legal professional privilege supported the conclusion that the examinations should not be set aside.

4. The Applicants also set out, at some length, the circumstances in which the liquidators indicated the orders for production would be narrowed, shortly before the hearing, and they were narrowed in the course of the hearing, and I have had regard to that matter. The liquidators accept that they narrowed the orders for production, but point out that it cannot be assumed that the examinations would have been set aside had that not occurred. It seems to me that the narrowing of the orders of production is ultimately of little weight, not least because the Applicants continued their application to set aside the examination summonses, to its ultimate failure, after the orders for production had been narrowed.

5. The Applicants also submit that the solicitor who was then acting both for a major creditor and the liquidator will not now be retained by the liquidator in the examinations. The Applicants rightly point out that I held that the examination summonses would not be set aside on that basis, and submit that the conclusion that the examination summonses should be set aside depended on that result. That does not follow, since I did not need to decide that question where the liquidators had sensibly made clear that they would retain an independent solicitor in the examinations. The liquidators respond that the change in the solicitor acting in the examinations for them was not a success for the Applicants, where they had not sought such relief and where, as I had noted in the judgment, the application to set aside the examination summonses was at least substantially based on the claim to legal professional privilege on which the Applicants failed. It seems to me that this matter reflected the position adopted by the liquidators in response to inquiries made by the Court, and cannot be treated as a success on the Applicants’ part.

6. The Applicants also rely on the fact that the liquidators’ former solicitor returned relevant files to the liquidators as being part of their “success” on the application. It seems to me that that is simply the natural consequence of the fact that the solicitor had ceased to act for the liquidators, while continuing to act for a major creditor. The relief sought by the Applicants was in quite different terms, contemplating orders that the files be returned to the Applicants’ solicitors or destroyed by the liquidators or the liquidators’ solicitors, and no such orders were made.

7. The Applicants also point to a late application brought by the liquidators, which ultimately did not need to be determined, that they be appointed as receivers over trust assets, which would include relevant documents of the trust as well as its other assets. It was ultimately not necessary to determine that application. The Applicants submit that they incurred costs in respect of that application, although it is difficult to see that those costs would have been substantial. I can see no basis on which the liquidators would be required to pay the Applicants’ costs of that application, which were not increased by its lateness, where that application would likely have succeeded had it been necessary for the receivers to pursue it. The liquidators confirmed, in submissions, that they do not seek any costs of the receivership application against the Applicants and I have not made any order as to costs in respect of that application.

8. For these reasons, it seems to me that no reason is established to depart from the usual position that costs follow the event. Accordingly, I order that the Applicants pay the liquidators’ costs of and incidental to their Interlocutory Process filed 2 October 2019 and their Amended Interlocutory Process filed 14 October 2019, as agreed or as assessed.

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Decision last updated: 22 December 2019