Kelly v Willmott Forests Ltd (in liquidation) (No 2) - [2013] FCA 732

FEDERAL COURT OF AUSTRALIA
Kelly v Willmott Forests Ltd (in liquidation) (No 2) [2013] FCA 732

Citation: Kelly v Willmott Forests Ltd (in liquidation) (No 2) [2013] FCA 732

Parties: DAVID KELLY and MARGARET KELLY (NEE ILACQUA) v WILLMOTT FORESTS LTD (IN LIQUIDATION) (ACN 063 263 650), JONATHAN DAVID MADGWICK, MARCUS DERHAM, JAMES WILLIAM ANTONY HIGGINS, HUGH THOMAS DAVIES, RAYMOND MAXWELL SMITH and BIOFOREST LIMITED (IN LIQUIDATION) (ACN 096 335 876)

File number: VID 1485 of 2011

Parties: DAVID KELLY and MARGARET KELLY (NEE ILACQUA) v MIS FUNDING NO 1 PTY LTD

File number: VID 1483 of 2011

Parties: AARON GRANT v COMMONWEALTH BANK OF AUSTRALIA

File number: VID 1484 of 2011

Judge: MURPHY J

Date of judgment: 26 July 2013

Catchwords: PRACTICE AND PROCEDURE – security for costs – security for costs in representative proceedings under Pt IVA – quantum and staging of security – contributions to security to be sought from unidentified group members – whether a stay should be ordered – reopening the case to admit fresh evidence.

Legislation: Federal Court of Australia Act 1976 (Cth) - s 37M

Cases cited:
Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (2013) 296 ALR 465
Coulton v Holcombe (1986) 162 CLR 1

Madgwick v Kelly [2013] FCAFC 61

Smith v NSW Bar Association (1992) 176 CLR 256
Sobey v Nicol and Davies (2007) 245 ALR 389
Watson v Australian Community Pharmacy Authority and Others (2012) 206 FCR 365

Date of hearing: 18 July 2013

Place: Melbourne

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 62

Counsel for the Applicants: Mr J W K Burnside QC and Mr R L Moore

Solicitor for the Applicants: Macpherson and Kelley Solicitors

Counsel for the First and Seventh Respondents in VID 1485 of 2011: Mr R G Craig

Solicitor for the First and Seventh Respondents in VID 1485 of 2011: Arnold Bloch Leibler

Counsel for the Second, Third, Fourth, Fifth and Sixth Respondents in VID 1485 of 2011: Mr J Delany SC and Ms C van Proctor

Solicitor for the Second, Third, Fourth, Fifth and Sixth Respondents in VID 1485 of 2011: Brian Ward & Partners

Counsel for the Respondents in VID 1483 of 2011 and VID 1484 of 2011: Mr B F Quinn SC and Mr A Di Pasquale

Solicitor for the Respondents in VID 1483 of 2011 and VID 1484 of 2011: Herbert Smith Freehills

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 1483 of 2011

BETWEEN:
DAVID KELLY
First Applicant

MARGARET KELLY (NEE ILACQUA)
Second Applicant

AND:
MIS FUNDING NO 1 PTY LTD (ACN 119 268 905)
Respondent

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 1484 of 2011

BETWEEN:
AARON GRANT
Applicant

AND:
COMMONWEALTH BANK OF AUSTRALIA
Respondent

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 1485 of 2011

BETWEEN:
DAVID KELLY
First Applicant

MARGARET KELLY (NEE ILACQUA)
Second Applicant

AND:
WILLMOTT FORESTS LTD (IN LIQUIDATION) (ACN 063 263 650)
First Respondent

JONATHAN DAVID MADGWICK

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] FCA 732
Decision Date

CaseChat Overview and Summary

The case of Kelly v Willmott Forests Ltd (in liquidation) (No 2) involved a complex dispute between the parties, which was heard before the court. The applicants sought security for costs from the respondents, who were in liquidation. The legal issues that arose from this dispute included the quantum and terms of security, as well as the fairness between the parties and case management considerations. The court had to balance the risk of injustice to the respondents against the risk of stultification if security was set unfairly or too high.

The court considered the evidence presented by both parties, including the financial capacity of the group members and their willingness to contribute to security. The court found that there were gaps in the evidence regarding the financial capacity and willingness of both the known and unidentified group members to contribute to security. The respondents sought that the total quantum of security be fixed at approximately $6.58 million, with approximately $4.83 million payable within 14 to 30 days. However, the court decided that it was not appropriate to fix the security at that time, and instead ordered a short regime to speedily commence, allowing the applicants to seek rateable contributions to security from the unidentified group members, and then the known group members.

In conclusion, the court ordered that the applicants seek contributions to security from the group members and obtain any explanation for any refusal to contribute. The court also ordered that the applicants pay the respondents' costs of the hearings of the security application before the court. The final orders will be determined at a case management conference.

The ratio of this case is that the applicants did not seek to reopen the application for security, but they may need to lead further evidence if they fail to obtain sufficient security. The court's decision highlights the importance of balancing the risk of injustice to the respondents against the risk of stultification if security is set unfairly or too high. The court also emphasised the need for case management considerations in fixing the quantum and terms of security.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Fairness between the parties and case management considerations indicate that it is not presently appropriate to fix the security, and that instead a short regime should speedily commence (which will take about 4-6 weeks) so as to provide the applicants with an opportunity to seek rateable contributions to security from the unidentified group members (and then the known group members), and obtain any explanation proffered by the group members for any refusal to contribute. CONCLUSION On 18 July 2013 I made orders requiring the Willmott Respondents to provide the grower registers and other information to the solicitors for the applicants so that they could contact the unidentified group members seeking contributions to security for costs. At the same time, on the basis that they were ultimately unsuccessful in the Full Court and there was no reason why costs should not follow the event, I ordered the applicants to pay the respondents’ costs of the hearings of the security application before me. At [39] I have set out the further orders which I propose to make, subject to hearing the parties as to their form at a case management conference. My chambers will be in contact with the parties shortly to organise an early date for that conference.

Ratio Decidendi

Legal Principle Established

The applicants did not seek to reopen the application for security at the hearing before me. They say that if their request that group members contribute to security meets with sufficient success then there will be no necessity to adduce any further evidence. However, they say that they may need to lead further evidence if they fail to obtain sufficient security, but obtain relevant further evidence as to the ability and willingness of both the unidentified and the known group members to make a contribution to security. CONSIDERATION In fixing the quantum and terms of security I must properly case manage these complex proceedings which are in the midst of a pre-trial timetable. I must balance the risk of injustice to the respondents in having no real capacity to recover from the applicants the cost of successfully defending the proceedings, against the risk or likelihood of stultification if security is set unfairly or too high. As the order for security necessarily involves contributions from group members to a fund, it must be fixed in an overall amount which will require the group members to make a real but not oppressive contribution. My evaluation of the risk of stultification must be a broad one, and cannot descend to a detailed analysis of each group member’s financial characteristics, but it nevertheless remains a difficult task. While there is evidence, as the Full Court found, that a not insignificant number of the known group members have the capacity to advance security, there remains a quite incomplete picture as to the ability and/or willingness of all group members to make the required contribution. The information deficit includes:(a)gaps in the evidence as to the financial capacity of many the 409 known group members to contribute to security, and the fact that little is known as to their willingness to contribute;(b)that the known group members make up a small proportion only of the total possible group members; and(c)more significant gaps in the evidence as to the financial capacity of the unidentified group members to contribute to security; and the fact that nothing is known as to their willingness to contribute. The respondents seek that I fix the total quantum of security in the sum of approximately $6.58 million, and order that approximately $4.83 million be payable within 14 to 30 days. They seek a stay if this first stage payment is not made. As I indicated during the hearing, the Full Court has ordered that security be provided, and I consider that, given the costs involved in these cases, the security must be substantial. If the rateable contributions per known group member are, as the respondents state, in the range of $5,101 or $12,430 (depending on whether one uses the mode method or the average method), then it may be accepted that they are unlikely to be oppressive to most known group members. My starting point is that an order for $6.58 million should be made comprised of $4.83 million security for pre-trial costs and the balance of security for the trial costs.

Citation:		Kelly v Willmott Forests Ltd (in liquidation) (No 2) [2013] FCA 732
Parties:		DAVID KELLY and MARGARET KELLY (NEE ILACQUA) v WILLMOTT FORESTS LTD (IN LIQUIDATION) (ACN 063 263 650), JONATHAN DAVID MADGWICK, MARCUS DERHAM, JAMES WILLIAM ANTONY HIGGINS, HUGH THOMAS DAVIES, RAYMOND MAXWELL SMITH and BIOFOREST LIMITED (IN LIQUIDATION) (ACN 096 335 876)
File number:		VID 1485 of 2011
Parties:		DAVID KELLY and MARGARET KELLY (NEE ILACQUA) v MIS FUNDING NO 1 PTY LTD
File number:		VID 1483 of 2011
Parties:		AARON GRANT v COMMONWEALTH BANK OF AUSTRALIA
File number:		VID 1484 of 2011
Judge:		MURPHY J
Date of judgment:		26 July 2013
Catchwords:		PRACTICE AND PROCEDURE – security for costs – security for costs in representative proceedings under Pt IVA – quantum and staging of security – contributions to security to be sought from unidentified group members – whether a stay should be ordered – reopening the case to admit fresh evidence.
Legislation:		Federal Court of Australia Act 1976 (Cth) - s 37M
Cases cited:		Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (2013) 296 ALR 465 Coulton v Holcombe (1986) 162 CLR 1 Madgwick v Kelly [2013] FCAFC 61 Smith v NSW Bar Association (1992) 176 CLR 256 Sobey v Nicol and Davies (2007) 245 ALR 389 Watson v Australian Community Pharmacy Authority and Others (2012) 206 FCR 365
Date of hearing:	18 July 2013
Place:	Melbourne
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	62
Counsel for the Applicants:	Mr J W K Burnside QC and Mr R L Moore
Solicitor for the Applicants:	Macpherson and Kelley Solicitors
Counsel for the First and Seventh Respondents in VID 1485 of 2011:	Mr R G Craig
Solicitor for the First and Seventh Respondents in VID 1485 of 2011:	Arnold Bloch Leibler
Counsel for the Second, Third, Fourth, Fifth and Sixth Respondents in VID 1485 of 2011:	Mr J Delany SC and Ms C van Proctor
Solicitor for the Second, Third, Fourth, Fifth and Sixth Respondents in VID 1485 of 2011:	Brian Ward & Partners
Counsel for the Respondents in VID 1483 of 2011 and VID 1484 of 2011:	Mr B F Quinn SC and Mr A Di Pasquale
Solicitor for the Respondents in VID 1483 of 2011 and VID 1484 of 2011:	Herbert Smith Freehills

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 1483 of 2011

BETWEEN:	AARON GRANT Applicant
AND:	COMMONWEALTH BANK OF AUSTRALIA Respondent