In the matter of Moylan Investment Group Pty Ltd (in liquidation)

[2015] NSWSC 353

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Moylan Investment Group Pty Ltd (in liquidation) [2015] NSWSC 353
Hearing dates:	Decided on the papers
Date of orders:	01 April 2015
Decision date:	01 April 2015
Jurisdiction:	Equity Division - Corporations List
Before:	Robb J
Decision:	(1)    The Court makes no order concerning the payment of the costs of the two notices of motion filed by the applicant on 5 November 2014, with the intent that the applicant and the respondent will pay their own costs. (2)    Order that the respondent’s costs of the notices of motion be the liquidator’s costs in the winding up.
Catchwords:	Costs – motions by third-party recipient of orders for production under s 68 of the Civil Procedure Act 2005 (NSW) in aid of liquidator’s examination under Part 5.9 of that Act to set aside the orders – substitute order for production made by the Court after a practical consideration of the categories of documents required by the liquidator – both parties share some responsibility for excessive correspondence and delay in bringing the issue before the Court – parties to bear their own costs of the notices of motion
Category:	Costs
Parties:	Dual Australia Pty Ltd (applicant) Bradd William Morelli (respondent)
Representation:	Counsel: S Kanagaratnam (applicant) S Clemmett (respondent) Solicitors: Kennedys (applicant) Rankin Ellison Lawyers (respondent)
File Number(s):	2011/117249
Publication restriction:	None

Judgment

1. The Court is concerned with the costs orders that should be made in respect of two notices of motion filed in these proceedings by the applicant against the respondent.

2. The proceedings involve the winding up of Moylan Investment Group Pty Ltd (in liquidation). The respondent to the notices of motion, Mr Bradd William Morelli, is the liquidator of the company.

3. On 18 July 2014 and 23 October 2014 the respondent caused orders for production under s 68 of the Civil Procedure Act 2005 (NSW) to be issued by the Court addressed to the proper officer of the applicant, Dual Australia Pty Ltd. The orders sought production of various categories of documents for the purpose of use by the respondent during examinations that he was conducting in the liquidation under Part 5.9 of the Corporations Act 2001 (Cth).

4. A brief history of what followed the service of the first order for production is necessary. The July order for production was returnable on 31 July 2014, and the documents sought were intended to be used at the liquidator’s examination that was set down for 21 August 2010. On 29 July, 6 August, 11 August, 13 August and 29 August 2014 the applicant’s solicitors wrote to the solicitors for the respondent in which they raised objections to the July order for production, and disputed the appropriateness of the order for production being served. At one stage the applicant sought information from the respondent in terms that suggested that the applicant thought that the respondent had served the order for production in support of private litigation that had been commenced by pleadings. The respondent’s solicitors responded by explaining that the order for production had been served in connection with a liquidator’s examination. The applicant produced a limited number of documents, but the dispute as to the width of the documents sought in the order for production remained unresolved. The applicant lost the benefit of having the documents available to assist in the conduct of the examination that was to occur on 21 August 2010. Ultimately, the respondent caused the October order for production to be issued and served on the applicant in order to refine and extend the categories of documents which he required to be produced for the purpose of the ongoing examination. The respondent also sought to dispel any apparent misunderstanding concerning the time period relevant to the selection of the documents that he sought to be produced. The correspondence war between the solicitors continued and on 31 October 2014 the applicant’s solicitors suggested, among other things, that the service of the October order for production constituted an abuse of process. It is sufficient to note that on 5 November 2014 the Registrar made an order that the applicant comply with the July order for production. The making of this order was not contested by the applicant, because its solicitor had not learnt of certain correspondence from the respondent’s solicitor, because of an unexplained mishap with the applicant’s solicitors’ computer system, and illness on the part of the applicant’s solicitor. In the events which happened, the necessary documents were not produced in time for a further hearing of the liquidator’s examination that was set down for 6 November 2014.

5. This outline of the relevant history is rudimentary, and in no way reflects the detail of the correspondence. One of the consequences of correspondence wars that opposing solicitors often engage in is that it is not practicable, or reasonable, in the resolution of disputes such as the present, for the Court to be required to delve in detail into the interstices of the correspondence.

6. The applicant filed two notices of motion on 5 November 2014. One of those notices of motion sought an order that the order made by the Registrar on 5 November 2014 be set aside. It also sought an order that the July order for production be set aside, and that the respondent pay the applicant’s costs of the notice of motion. The other notice of motion sought an order that the October order for production be set aside, and that the respondent pay the applicant’s costs of that notice of motion.

7. I dealt with the notices of motion on 10 and 14 November 2014 and delivered an ex tempore judgment on the latter date.

8. In essence, I dealt with the contest as to the reasonableness of the width of the documents sought by the respondent in the two orders for production on a case management basis. That is to say, I declined to hear detailed argument on a paragraph by paragraph basis in order to determine strictly which paragraphs of the orders for production the respondent could sustain, and which he could not. I heard submissions and formed preliminary, practical views as to the descriptions of the documents that the applicant should be ordered to produce. I gave the respondent an opportunity to review his schedule of documents to be produced in the light of the observations that I had made. I directed that the applicant be given an opportunity to review and comment upon the revised schedule prepared by the respondent.

9. I made an order that the applicant produce documents in response to the respondent’s amended schedule by 5 December 2014. The categories of documents in the amended schedule were more limited than the sum of the schedules to the July and October orders for production. To that extent the applicant was successful on its notices of motion. However, the amended schedule did not reflect a detailed finding by the Court that the respondent had not been justified in seeking any of the documents described in the schedules to the earlier orders that were not also included in the amended schedule. It would have taken an inordinate amount of court and judicial time for that exercise to have been carried out meticulously. The reality is that I probably would have rejected part of the respondent’s earlier categories, but allowed the respondent to sustain some categories of greater width than ultimately were included in the amended schedule.

10. I set aside the order made by the Registrar on 5 November 2014. I did not do so because I thought that the order was wrongly made on that date. On the contrary, it was rightly made in the absence of any appearance for the applicant. The reason that I set the order aside was that a requirement that all of the documents in the schedule to the July order for production be produced was inconsistent with the limited production required by the order that I made based upon the amended schedule.

11. I noted that certain documents had been produced in response to the July order for production, but excused the applicant from further compliance with that order.

12. I also excused the applicant from the requirement that it comply with the October order for production.

13. I made consequential orders intended to facilitate the parties discussing and resolving any new disputes about the production of the documents described in the amended schedule and to bring the matter back before the Court to resolve any disputes.

14. The applicant did not seek an order in either of its notices of motion that the respondent pay its reasonable costs of producing the documents that it has produced, either under the original orders for production or in response to the amended schedule. However, in its written submissions on the dispute as to costs it has asked for this order to be made in its favour. The applicant seeks an order that the respondent pay its costs of the two notices of motion filed on 5 November 2014.

15. The order sought by the respondent is that the applicant pay the respondent’s costs of the notices of motion; or in the alternative, that an order should be made that the parties bear their own costs, and that the respondent’s costs be the liquidator’s costs in the winding up.

16. I am satisfied that the solicitors for the parties have acted conscientiously, but I would observe that it would be desirable where a third party receives an order for production of documents in aid of a liquidator’s examination, for that party and its solicitors to respond quickly, to challenge any aspect of the order that is considered to be excessive or inappropriate, but to do so in a positive and proactive way to try to facilitate production of those documents that must be produced in a timely and cost-effective way. If agreement cannot be reached with the liquidator promptly, the party in receipt of the order for production should quickly file a notice of motion to enable the Court to resolve the issue. It will usually be undesirable for the solicitors for the parties to engage in extensive claim and counter claim in correspondence concerning whether the order to produce can be sustained.

17. In the present case the applicant ultimately gained a significant, but not entire, measure of success in having the width of the categories of documents the subject of the original orders for production reduced. However, as I have said, that result flowed to some extent from the respondent bowing to suggestions made by the Court of a practical nature designed to minimise the scope for disputation between the parties. Furthermore, it was necessary for the applicant to obtain what was an indulgence from the Court in setting aside the order made by the Registrar on 5 November 2014, which was an order made because of the failure of the applicant to appear before the Court. Also, the delay by the applicant in failing to file its notices of motion until 5 November 2014 had the consequence that the respondent incurred significant expense in responding to earlier correspondence, much of which has been wasted. The delay in the issue being resolved also interfered with the efficient conduct of the liquidator’s examination.

18. On the other side it must be recognised that the Court has taken the view that the width of the categories of the documents the subject of the two orders for production were somewhat wider than could be sustained. Just as it is true that the applicant waited for an excessive time before it filed the notices of motion, it is also true that the respondent did not bring the issue to a head by formally calling on the applicant in Court to produce the documents at an early time. I do not criticise the respondent for its attempts to be reasonable in his correspondence with the applicant, but it should be recognised that the respondent as well is the applicant was to some degree responsible for the costs that have been wasted in excessive correspondence.

19. It is quite impossible in an application such as the present for the Court to weigh in any realistic way the relative responsibility for each of the parties for the costs that have been wasted in relation to the terms in which the original orders for production were drawn, the correspondence in which the parties contested the sustainability of the orders for production, and the delay in either filing the notices of motion or calling upon the orders for production. It will therefore be appropriate that the parties bear their own costs of the notices of motion.

20. I am satisfied that the respondent has acted reasonably and conscientiously as liquidator, and that an order should be made that all of the costs incurred by him in responding to the notices of motion should be his costs in the winding up. I will make an order to that effect accordingly.

21. In principle there is no reason by the respondent should not be ordered to pay the applicant’s costs, limited to the costs of actually producing the documents that have been produced to the court either under the original orders for production, or the order that I made on 20 November 2014. However, ordinarily those costs would be ordered to be paid in the context of the liquidator’s examination. Equally, the respondent’s costs of issuing the orders for production, and the costs that he has to pay to the respondent for producing the documents, should be the subject of appropriate orders as part of the liquidator’s examination. If my assumption that the necessary orders should be made as part of the liquidator’s examination is wrong is wrong, I would entertain an application by the parties to make appropriate orders in these proceedings. Any such application should be made promptly.

22. I make the following orders:

1. The Court makes no order concerning the payment of the costs of the two notices of motion filed by the applicant on 5 November 2014, with the intent that the applicant and the respondent will pay their own costs.

2. Order that the respondent’s costs of the notices of motion be the liquidator’s costs in the winding up.

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Decision last updated: 13 April 2015