McKern v Minister administering the Mining Act 1978 (WA); Re Centaur Mining & Exploration Ltd (No 2)
[2008] VSC 625
•8 December 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
No. 7676 of 2005
| IN THE MATTER OF CENTAUR MINING & EXPLORATION LTD (in liquidation) (receivers and managers appointed) (ACN 004 805 145) and CENTAUR NICKEL PTY LTD (in liquidation) (receiver and managers appointed) (ACN 079 092 194) ROBYN BEVERLEY McKERN, COLIN McINTOSH NICOL and SAMUEL CHARLES DAVIES (in their capacities as liquidators of CENTAUR MINING & EXPLORATION LTD (in liquidation) (receivers and managers appointed) (ACN 004 805 145) and CENTAUR NICKEL PTY LTD (in liquidation) (receivers and managers appointed) (ACN 079 092 194)) | Plaintiffs |
| v | |
| MINISTER ADMINISTERING THE MINING ACT 1978 (WA) | Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 December 2008 | |
DATE OF JUDGMENT: | 8 December 2008 | |
CASE MAY BE CITED AS: | Re Centaur Mining & Exploration Ltd (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 625 | |
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COSTS – Application for indemnity costs by a successful defendant – Calderbank offer – whether rejection of offer of defendant unreasonable – Plaintiffs’ case raised matters of public importance – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr H N G Austin | Deacons |
| For the Defendant | Mr G T Bigmore QC with Mr M N C Harvey | Victorian Government Solicitor’s Office |
Cases cited
Calderbank v Calderbank [1976] Fam 93
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435
Sheldrake v Paltoglou [2006] QCA 52
VR Dye v Peninsula Hotels [1993] 3 VR 201
Walsh v Natra Pty Ltd (2000) 1 VR 523
HIS HONOUR:
On 15 October 2008, I delivered judgment in this matter in favour of the defendant. The plaintiffs had brought proceedings seeking the recovery of rent and royalty payments made to the defendant by Centaur Mining as unfair preferences. I found that applying the ultimate effect principle the payments were not preferential payments. The successful defendant seeks an order that the plaintiffs pay its costs to be taxed on a party/party basis up to and including 8 May 2007 and thereafter on an indemnity basis including all reserved costs.
The application is based on a letter of 8 May 2007 in which the defendant offered to pay the plaintiffs $300,000 inclusive of all claims, interest and costs, in full settlement of the plaintiffs’ claim. At that stage, a defence had been filed by the defendant disclosing that the defendant relied on the ultimate effect principle. Counsel for the defendant had said as much in open court on 19 March 2007. In particular he identified the defendant’s primary defence, describing it as the landlord's defence.
The principles to be applied, where a party rejects a Calderbank[1] offer and thereby enlivens the issue of whether indemnity costs should be ordered, are set out in Hazeldene’s Chicken Farm v Victoria WorkCover Authority (No.2)[2], a decision of the Court of Appeal. Warren CJ, Maxwell P and Harper AJA stated in their joint judgment:
[23] In our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as ”manifestly” or “plainly” unreasonable.
[24] Of course, deciding whether conduct is “reasonable” or “unreasonable” will always involve matters of judgment and impression. These are questions about which different judges might properly arrive at different conclusions. As Gleeson CJ said recently, “unreasonableness is a protean concept”. But a test of reasonableness is, we think, entirely appropriate to the exercise of a discretion such as this.[3] (citations omitted)
[1]Calderbank v Calderbank [1976] Fam 93.
[2](2005) 13 VR 435.
[3]Ibid 441-442.
Under the heading “Factors relevant to assessing reasonableness”, the Court of Appeal said:
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.[4]
[4]Ibid 442.
The Court continued:
It has been argued on occasion that the maker of a Calderbank offer should not be entitled to costs unless the offer sets out, with some reasonable specificity, the basis for the offeror’s contention that the offeree should accept the compromise - for example, because the offeree’s case was hopeless or because the offeree had no reasonable prospects of doing better in the proceedings than was being offered in advance.
Once again, we think it neither necessary nor desirable to lay down any general rule in this regard. We would agree with what Redlich J said in OCBC[5], as follows:
‘Any attempt to prescribe the reasoning which must accompany [a Calderbank] offer should be resisted. Whether there is a need for the offeror to descend to specificity as to why the offer should be accepted must depend upon a consideration of all of the circumstances existing at the time of the offer. The extent to which the weakness of a party’s position is exposed through the pleadings, affidavits and the various communications between the parties during the course of the litigation may bear upon the significance of the absence of specificity in the informal offer.’[6]
[5][2004] VSC 351 at [87].
[6]Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435, 442.
In applying those principles, the plaintiffs rely upon (a) in the list set out by the Court of Appeal and quoted above, that is; the stage of the proceeding at which the offer was received.
The plaintiffs submit the stage of the offer discovery was incomplete and discovery of material relevant to the defendant’s defence concerning the value of leases had not been discovered.
No issue was raised concerning point (b), the time allowed to the offeree to consider the offer. As to point (c), that is the extent of the compromise offered, which in monetary terms amounted to $300,000, the plaintiffs submit that in assessing whether the offer was reasonable or not, the prospects of success should be taken into account. I will deal with this consideration below.
There is no objection made in respect of point (e), that is, the clarity with which the terms of the offer were expressed. The next consideration at point (f) raises the issue of whether or not the offer foreshadowed an application for an indemnity cost in the event of the plaintiffs rejecting it. The plaintiffs contend that such an application was not foreshadowed in the offer. In my view the complaint lacks merit. In this case experienced solicitors were acting on both sides and clearly knew the point of the letter.
Whilst there were many issues of fact in issue, the main issue between the parties in this case was whether the ultimate effect principle survived the introduction of Part 5.7B to the Corporations Act2001.
Ormiston JA, in VR Dye v Peninsula Hotels,[7] made an exhaustive and thorough examination of the history of the ultimate effect principle, the amending legislation, the introductory reports and speeches that accompanied the amendments. He concluded that the ultimate effect principle had survived the introduction to Part 5.7B and the law relating to unfair preferences had not materially changed in Australia.
[7][1999] 3 VR 201
The plaintiffs contended the law had changed in Australia and the ultimate effect principle did not survive, save to the extent it was expressly adopted in the case of running accounts and in Part 5.7B.
In those circumstances, I have to decide whether or not it was reasonable for the plaintiffs to reject the defendant’s offer.
The plaintiffs submit the offeree’s prospects of success should be considered in light of the modest size of the offer made relative to the costs they had incurred and the amount that the plaintiffs were seeking to recover, which was in the order of $2 million.
The letter of the plaintiffs’ solicitors in response to the Calderbank offer, however, did not make any reference to this issue. The letter asserted that Dye’s case,[8] was misunderstood. The letter did not claim that what Ormiston JA said was incorrect. The letter stated that if applied to the facts of this case, then the plaintiffs would win.
[8][1999] 3 VR 201.
Further, the plaintiffs did not refer to Sheldrake v Paltoglou,[9] a decision of the Queensland Court of Appeal, which the plaintiffs contend contradicts VR Dye & Co.[10] As I pointed out in my judgment, the Court of Appeal in that case did not refer to VR Dye & Co[11] and did not address the arguments raised in VR Dye & Co. [12]
[9][2006] QCA 52.
[10][1999] 3 VR 201.
[11][1999] 3 VR 201.
[12][1999] 3 VR 201.
The plaintiffs also rely on Walsh v Natra Pty Ltd,[13] a decision of the Victorian Court of Appeal and in particular of the observations made by Phillips JA.[14] I think it is fair to say, without quoting the passage relied on that his Honour observed that the section, by its terms, considered the effect of a transaction on the alleged preferee and whether he or she was better off by reason of the transaction, whereas the previous law considered the effect of the transaction upon the existing creditors and whether or not they were worse off by reason of the transaction. In my view, Phillips JA raised the issue which the plaintiffs wished to raise in this case.
[13](2000) 1 VR 523.
[14]Ibid [47].
Despite the plaintiffs’ letter of response to the Calderbank offer not raising the real issue that the plaintiffs ran at the trial, in my view it was not unreasonable for the plaintiffs to reject the defendant’s offer. It is arguable that Ormiston JA’s decision was obiter. The issue of whether or not the ultimate effect principle survived the amendments to the Corporations Act 2001 is of considerable importance to the administration of company law in Australia. In the circumstances, I do not think it was unreasonable for the plaintiffs in this case to test what Ormiston JA said in Dye’s case, particularly where there was so much money at stake, some $2 million.
For these reasons I reject the application for indemnity costs.
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