Jennings v Oswell Pty Ltd (in liquidation)

[2004] QSC 141

SUPREME COURT OF QUEENSLAND

CITATION:

Jennings v Oswell Pty Ltd (in liquidation) [2004] QSC 141

PARTIES:

MICHAEL JAMES JENNINGS
(applicant)
v
OSWELL PTY LTD (IN LIQUIDATION)
ACN 006 408 788
(respondent)

FILE NO/S:

SC No 5635 of 1998

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at  Brisbane

DELIVERED ON:

14 May 2004

DELIVERED AT:

Brisbane

HEARING DATE:

31 March 2004

JUDGE:

Mackenzie J

ORDER:

Costs reserved by RR Douglas J by order of 27 February 2002, original liquidators of Oswell Pty Ltd (in liquidation) ACN 006 408 788 on the standard basis to be assessed.1.   

Costs of and incidental to the application heard on 31 March 2004 be paid by the applicant in the original application to the original liquidators of Oswell Pty Ltd (in liquidation) ACN 006 408 788 on the indemnity basis, to be assessed.  2.   

CATCHWORDS:

PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON INDEMNITY BASIS – where additional liquidator appointed – where costs reserved – whether costs reserved disposed of in a later judgment – where misapprehension not resiled from until day before hearing

COUNSEL:

M Williams for the applicant
C Wilson for the respondent

SOLICITORS:

Abbott Tout Solicitors for the applicant
Phillips Fox for the respondent

1. MACKENZIE J:         The background to the application before me is that an application had been made by Mr Jennings, a creditor of Oswell Pty Ltd, to remove Messrs Furby and Moloney (“original liquidators”) as liquidators of the company.  That application failed but RR Douglas J ordered, on 27 February 2002, that Mr Schmierer be appointed as additional liquidator to investigate two specific transactions and to report on them.  He reserved the costs of the proceedings to that point.

1. The application had been preceded by correspondence between solicitors for Mr Jennings and solicitors for the original liquidators about the terms of the order.  Two contentious issues were whether, upon appointment of the additional liquidator, the original liquidators should be removed and the scope of the investigations to be undertaken by the additional liquidator.  Failure to reach agreement on these issues was a factor in the application being brought.  The order made by RR Douglas J was more limited in scope than the final suggestion by solicitors for the applicant, and significantly more restricted than the relief pursued at the hearing. 

1. There was a later disagreement between the original liquidators and the additional liquidator about the scope of information to be provided to the latter, details of which are not necessary for present purposes.  The result was that an application was filed on 23 August 2002 by the original liquidators seeking removal of the additional liquidator and dismissal of the application for the removal.  That was resolved by orders made by me on 12 September 2002.  Three of the orders made were as follows:

“7.As between the liquidators and the additional liquidator there shall be no order as to costs.

8.The Applicants pay costs of the Respondent with respect to this application including reserved costs.

9. The Applicants may recover costs as costs in the liquidation.”

1. The reserved costs referred to in the second of those orders are costs of the adjournment by consent on the papers of the original liquidators’ application, eventually heard by me.  The transcript of proceedings (Exhibit AF17 to the affidavit of Mr Furby dated 29 March 2004) confirms this beyond any argument.  The other terms of my orders were implemented and the additional liquidator’s report was circulated on or about 24 September 2002.  It essentially mirrored a view expressed some time before by the original liquidators that certain persons might be examined, provided funds, which were not available in the liquidation, were provided from another source.

1. The next relevant event was service of an application for a costs assessment based on the order of 12 September 2002 and a costs statement as between the creditor and the original liquidators.  Particulars of objection were served, identifying the first 49 items as objectionable because the creditor was not entitled to those costs under the order of 12 September 2002.  It is apparent, even on a cursory inspection of them, that those items relate to steps in the proceedings which preceded the application in respect of which the costs order of 12 September 2002 was made.  This was pointed out by the original liquidators’ solicitors on 9 March 2004 in correspondence.  On the same day a request was made to the applications list clerk for the matter to be re-listed. 

1. The creditor’s solicitors’ response was that the costs fell within the terms of order 8 made on 12 September 2002.  It was stated as follows:

“The costs reserved pursuant to the Order of His Honour Justice Douglas of 27 February 2002 were awarded to our client, the Respondent, pursuant the Order of His Honour Justice Mackenzie of 25 September 2002.

The Application filed 23 August 2002 sought costs including the reserved costs under the order of 27 February 2002 on an indemnity basis.  The subsequent Order of His Honour Justice Mackenzie states:

“8.        The Applicants pay the costs of the Respondent

with respect to this application including reserved

costs.”

The two applications were related with the original application being adjourned to a date to be fixed. 

It is our client’s position that an order for costs relating to the application the Applicants seek to have re-listed has already been made by the Court.  The Applicants’ only recourse is to appeal the decision of His Honour Justice Mackenzie.”

A fax to the applications listing clerk repeated this view.  The original liquidators’ solicitors noted the submissions but said that they did not accept them. 

1. It is against that background that the original liquidators asked for the costs reserved by RR Douglas J and costs of the application heard on 31 March 2004 on an indemnity basis. 

1. With respect to the costs reserved by RR Douglas J it was conceded in submissions that the only explanation for their inclusion in the costs assessment was a misreading of my order of 12 September 2002.  Although it was said before me that the incorrect premise upon which their inclusion was based was conceded on the day before the application, the application had developed to a point where it had been made with justification.  The last minute concession that the premise of the opposition was fundamentally flawed did not render the application unnecessary because there was no concession as to how the reserved costs should be disposed of. 

1. It may be observed that what I was ordering should have been known to the creditors’ legal representative who appeared before me.  The transcript shows that there was no ambiguity in what was intended to be the scope of the order on the day.

1. With respect to the disposition of costs reserved by RR Douglas J, I am satisfied that they should be paid by the creditor, the applicant in the original proceedings, on the standard basis.  The reason is that the original liquidators’ approach was vindicated by the additional liquidator’s report.  There proved to be no reason for removal of the original liquidators.  The appointment of an additional liquidator to investigate the factual substratum of the application for removal was a necessary step in the process.  The step did not represent any significant success on the part of the creditor on the original application.  However the fact of making of the application in my view does not have appropriate features requiring those costs to be paid on an indemnity basis.

1. With respect to the costs of the application of 31 March 2004 I am satisfied that firstly there was no basis for the stance taken that the costs reserved by RR Douglas J were included in the order made by me.  I am satisfied, secondly, there was no viable basis for resisting an order that the reserved costs of the application before RR Douglas J should be paid by the applicant in the original application. 

1. It follows that had consideration of that aspect of the matter not become clouded on the part of the applicants’ advisors, timely reflection should have resulted in concession of that point as well.  There is no application that the legal advisors pay the costs personally.  In the circumstances I am satisfied that the costs of and incidental to the application of 31 March 2004 should be paid by the applicant in the original proceedings on an indemnity basis to the original liquidators of Oswell Pty Ltd (in liquidation).

1. The orders are as follows:

1.          Costs reserved by RR Douglas J by order of 27 February 2002, original liquidators of Oswell Pty Ltd (in liquidation) ACN 006 408 788 on the standard basis to be assessed.

2.          Costs of and incidental to the application heard on 31 March 2004 be paid by the applicant in the original application to the original liquidators of Oswell Pty Ltd (in liquidation) ACN 006 408 788 on the indemnity basis, to be assessed.