Mensink v Parbery

Case [2017] FCA 1248

FEDERAL COURT OF AUSTRALIA

Mensink v Parbery [2017] FCA 1248

Appeal from: In the matter of Queensland Nickel Pty Ltd (In Liquidation), Federal Court of Australia, QUD580/2016, Order dated 27 March 2017 and Orders 1, 2, 3, 6, 8, 9 and 10 dated 28 March 2017
File number: QUD 208 of 2017
Judge: WIGNEY J
Date of judgment: 24 October 2017
Catchwords: PRACTICE AND PROCEDURE – application for security for costs of appeal – principles to be applied – whether risk that an order for costs will not be satisfied – prospects of success – where no evidence of impecuniosity or financial hardship – where appellant travelling outside the jurisdiction and may not return to Australia – where appellant has assets in the jurisdiction but equity in assets uncertain – where appeal relates to the liberty of the appellant – security for costs ordered – appropriate quantum of security
Legislation:

Corporations Act 2001 (Cth) s 596A

Federal Court of Australia Act 1976 (Cth) ss 4, 24, 56

Federal Court (Corporations) Rules 2000 (Cth) r 11.10

Federal Court Rules 2011 (Cth) rr 36.09, 36.11(1), 44.14
Cases cited:

Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Ltd  [2012] FCAFC 57

Bethune v Porteous (1892) 18 VLR 493

Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497

Clack v Collins (No 1) [2010] FCA 513

Dye v Commonwealth Securities Limited [2012] FCA 992

Elston v Commonwealth of Australia [2014] FCA 704

Equity Access Ltd v Westpac Banking Corporation [1989] FCA 520; (1989) ATPR 40-972

Fiduciary Ltd v Morningstar Research PtyLtd [2004] NSWSC 664; (2004) 208 ALR 564

Hells Angels Motorcycle Corporation (Australia) Pty Ltd v Redbubble Ltd [2016] FCA 530

Hood Barrs v Heriot [1896] 2 QB 375

Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621

Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276;

Kennedy v McGeechan [1978] 1 NSWLR 314

King v Commercial Bank of Australia Ltd (1920) 28 CLR 289

Litmus Australia Pty Ltd (in liq) vCanty [2007] NSWSC 670

Logue v Hansen Technologies Ltd [2003] FCA 81; (2003) 125 FCR 590

Mobilia v Voudiotis [2002] VSCA 72; (2002) 4 VR 327

PS Chelleram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 102 ALR 321

Parberry, in the matter of Queensland Nickel Pty Ltd (in liq) [2017] FCA 880

Soh v Commonwealth of Australia [2008] FCA 1524

Tait v Bindal People [2002] FCA 322
Date of hearing: 28 September 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 72
Counsel for the Appellant: Mr P Zappia QC with Mr B Petrie
Solicitor for the Appellant: Alexander Law
Counsel for the Respondent: Mr T P Sullivan QC with Mr A C Stumer
Solicitor for the Respondent: King & Wood Mallesons

ORDERS

QUD 208 of 2017
BETWEEN:

Continue reading Mensink v Parbery

Sign in free to access the full text

Details
AGLC
Mensink v Parbery [2017] FCA 1248
Case
[2017] FCA 1248
Decision Date

CaseChat Overview and Summary

In Mensink v Parbery, the respondent liquidators of Queensland Nickel sought security for the costs of an appeal brought by the appellant, Mr Mensink, who had previously been a director and secretary of the company. Mr Mensink had been ordered to attend for examination but had failed to comply with these orders, resulting in the issuance of arrest warrants for his non-compliance. The liquidators sought security for costs, arguing that Mr Mensink had left Australia and might not return, thereby increasing the risk that any adverse costs order would remain unsatisfied.

The court needed to determine whether the circumstances warranted an order for security for costs and, if so, the appropriate amount. The key issues involved balancing the risk of non-compliance against the appellant's financial situation and the nature of the appeal, which related to Mr Mensink's liberty. The court considered that, while Mr Mensink had assets in Australia, his equity in those assets was uncertain, and he had already demonstrated a disregard for court orders by leaving the country.

In assessing the appropriate quantum of security, the court examined the estimates provided by both parties. The liquidators' expert estimated the costs of the appeal at approximately $138,500, while Mr Mensink's solicitor estimated the costs at around $42,000. The court concluded that an order for security was justified given the risk of non-compliance, but not for the full amount sought. The court ordered Mr Mensink to provide security for $70,000 within 28 days, with the appeal to be stayed until the security was provided. If the security was not provided within 42 days, the appeal would be dismissed.

Orders

Orders of the court

1. Within 28 days of the date of these orders the appellant give security for the respondent’s costs of the appeal in the sum of $70,000 by:

(a) paying the money into Court; or

(b) providing to a Registrar of this Court an unconditional bank guarantee from an Australian-owned bank (as recognised by the Australian Prudential Regulation Authority) in a form acceptable to the Registrar.

2. The appeal be stayed until security is given in accordance with Order 1.

3. In the event that the security referred to in Order 1 is not provided within 42 days of the date of these orders, and unless the Court otherwise orders before that time, the appeal be dismissed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, this is an appropriate matter for an order for security for costs, though not for the full amount sought by the liquidators.BACKGROUND Mr Mensink was a director of Queensland Nickel at various times between 2012 and 2017. He was also the company secretary between mid-2013 and early-2017. On 18 January 2016, at a time when he was the sole director of Queensland Nickel, Mr Mensink placed the company into voluntary administration. The period of voluntary administration was relatively short-lived. On 22 April 2016, a meeting of Queensland Nickel’s creditors resolved to wind up the company, with the result that the then administrators became the company’s liquidators. Shortly thereafter, on 18 May 2016, an order was made appointing Mr Owen and Mr Parbery special purpose liquidators of Queensland Nickel for the purpose of, among other things, investigating dealings or transactions between Queensland Nickel and its related entities. A third special purpose liquidator appointed at the same time, Mr Ayres, subsequently resigned as liquidator in March 2017. On 3 August 2016, a summons for the examination of Mr Mensink was issued pursuant to s 596A of the Corporations Act. That summons was returnable on 19 August 2016. It soon became apparent, however, that Mr Mensink had departed the country by that time, thus rendering personal service of the summons impossible. On 15 December 2016, a Registrar of the Court ordered substituted service of an amended summons for Mr Mensink’s examination, and adjourned the summons to 22 February 2017. On 31 January 2017, Mr Mensink swore an affidavit in which he stated as follows (as drafted):Reasonable excuseI am currently undertaking a cruise whereby the journey ends on the 8 February 2017, which is 9th February 2011 (Australian Time). Following the end of the current Journey. I have made extensive arrangements to travel to Europe and spend time with my late father’s family in Holland. My overseas travel has been a long-standing arrangement and if I do not follow the current arrangements I will incur significant damages. In addition to personal and health determents [sic] set out hereunder; I will incur substantial financial costs and damages if I broke my current committed schedule which would have me returning to Australia in late July 2017. My father’s family are elderly and this may be the last time I have to spend time with them.Examinations, Time and Legal AdviceI understand I am required subject to a reasonable excuse not to attend to the Federal Court of Australia on 9th February 2017 and from day to day until excused by the Court for examination by the GPLs and from 22nd February 2017 and thereafter from day to day until excused by the Court for examination by the SPLs on the 15th December 2016. I have not received any documentation in respect of such examinations nor have I had the opportunity of meeting with and discussing matters with an Australian Lawyer to properly prepare for any examination and to understand the information the GPLs and SPLs are seeking. In such circumstances I do not believe it is not reasonable to expect my attendance at the examinations without having the benefit of appropriate Legal advice.I am amongst other things and for the reasons set out in this my affidavit not able to attend to the examinations as it would not be reasonable for me to do so.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Third, it is relevant that, to the extent that the orders involve the deprivation of Mr Mensink’s liberty, that situation has only arisen because, on just about any view of the relevant facts and circumstances, Mr Mensink has ignored, and continues to ignore, Court orders. That is relevant to an assessment of the weight that should be given to this consideration.Conclusion When all the relevant considerations are weighed up, the balance clearly falls in favour of ordering that Mr Mensink provide security for costs. There is, in all the circumstances, a significant risk that Mr Mensink will not voluntarily comply with any adverse costs order that may be made against him. That would leave the liquidators in the invidious position of having to enforce the order against Mr Mensink in circumstances where his whereabouts are unknown. While Mr Mensink is the registered proprietor of two properties in Australia, the equity he has in those two properties is at best unclear. It is, in any event, difficult to see why the liquidators should be put to the considerable trouble and expense of seeking to enforce any adverse costs order against those properties in circumstances where Mr Mensink continues to absent himself from the jurisdiction. Those factors outweigh the fact that the appeal concerns, to an extent, Mr Mensink’s liberty. In the particular and somewhat peculiar circumstances of this matter, that consideration is not deserving of significant weight.QUANTUM OF SECURITY The amount of security that may be ordered is within the discretion of the Court. It is not necessarily the case that the Court will order an amount that will provide a complete indemnity against costs. Much will depend on the particular facts and circumstances of the case. As has already been noted, the liquidators relied, in relation to quantum, on a report prepared by an experienced costs assessor, Mr Bloom. Mr Bloom expressed the opinion that the liquidators’ reasonable costs in relation to the appeal, including this application, would be likely to be $138,500. Of that amount, $68,200 was referrable to fees incurred by the liquidators’ solicitors, and $70,300 was referrable to counsel’s fees. Mr Bloom’s report was generally well-reasoned, and the methodology employed by him was sound and consistent with the Rules. He was not cross-examined. Mr Mensink relied on affidavit evidence from his solicitor, Mr Iskander. Mr Iskander expressed the view that Mr Bloom’s estimates assumed a “particularly litigious approach” to the appeal by the liquidators. He estimated that the reasonable costs of running the appeal would be approximately $30,000 to $40,000 for each party, though a table that contained a breakdown of his estimate arrived at a figure of $42,040. Of that amount, only $7,040 was referrable to solicitors’ fees. Mr Iskander noted that the appeal was limited to points of law, that Mr Mensink bore the primary responsibility for the preparation of the appeal books, that the majority of work required to be undertaken to prepare the matter for hearing was properly the work of counsel alone, and that the work required to be undertaken by the parties in relation to the security for costs application was likely to exceed the work required to be undertaken to run the appeal itself. Mr Iskander was not cross-examined.

Ratio Decidendi

Legal Principle Established

Mr Mensink did not comply with the orders made on 27 February 2017. He failed to attend for examination before the Registrar on the morning of 27 March 2017. He also failed to appear before the primary judge to show cause why a warrant for his arrest should not issue. The primary judge’s response was to make an order, pursuant to r 11.10 of the Federal Court (Corporations) Rules 2000 (Cth), that Mr Mensink be arrested and brought before the court to attend for examination. Rule 11.10 of the Corporations Rules provides as follows:11.10 Default in relation to examination(1)This rule applies if a person is summoned or ordered by the Court to attend for examination, and:(a)without reasonable cause, the person:(i)fails to attend at the time and place appointed; or(ii)fails to attend from day to day until the conclusion of the examination; or(iii)refuses or fails to take an oath or make an affirmation; or(iv)refuses or fails to answer a question that the Court directs the person to answer; or(v)refuses or fails to produce books that the summons requires the person to produce; or(vi)fails to comply with a requirement by the Court to sign a written record of the examination; or(b)before the day fixed for the examination, the person who applied for the summons or order satisfies the Court that there is reason to believe that the person summoned or ordered to attend for examination has absconded or is about to abscond.(2)The Court may:(a)issue a warrant for the arrest of the person summoned or ordered to attend for examination; and(b)make any other orders that the Court thinks just or necessary. On the following day, 28 March 2017, the primary judge signed a statement of charge for contempt for failing to comply with the orders dated 15 December 2016 and 27 February 2017. His Honour also ordered that a warrant issue, pursuant to rule 42.14 of the Federal Court Rules 2011 (Cth), for the arrest and detention of Mr Mensink until he was able to be brought before the Court to answer the contempt charge. Rule 42.14(1) and (2) of the Rules provide as follows:42.14 Arrest(1)If an application for punishment of a contempt has been filed, or a proceeding has been started for punishment of a contempt, a party making the charge may apply to the Court for:(a)an order that the person charged give security for the person’s appearance to answer the charge; or(b)a warrant for the person’s arrest and detention in custody until the person is brought before the Court.(2)The party making the charge under subrule (1) must satisfy the Court that the person charged is likely to abscond or otherwise withdraw from the jurisdiction of the Court. Both arrest warrants were subsequently issued on 29 March 2017. By notice of appeal filed 13 April 2017, Mr Mensink appeals from the arrest warrant orders, as well as ancillary orders dated 28 March 2017 concerning substituted service and costs. The grounds of appeal are in the following terms:1.The learned primary judge made each of the said orders in circumstances there where there was no evidence and no proper basis upon which the learned primary judge could conclude that the Appellant had notice of orders made by the Court on 15 December 2016 and 27 February 2017 requiring, respectively, his attendance for examination on 27 February 2017 and 27 March 2017.2.The learned primary judge erred in ordering that a warrant be issued for the arrest of the Appellant under r 11.10 of the Federal Court (Corporations) Rules 2000 (Cth) in that:a. The learned primary judge failed to consider, or failed to adequately consider, whether the Appellant had reasonable cause for not attending Court on 27 March 2017.b. There was no proper basis upon which the learned primary judge could conclude that the Appellant did not have reasonable cause for not attending Court on 27 March 2017.3.The learned primary judge erred in ordering that a warrant be issued for the arrest and detention of the Appellant under r 42.14(1)(b) of the Federal Court Rules 2011 (Cth) (Rules) in that:a. The learned primary judge failed, or failed adequately to consider, whether the Appellant was likely to abscond or otherwise withdraw from the jurisdiction within the meaning of r 42.14(2) of the Rules;b. There was no proper basis upon which the learned primary judge could conclude that the Appellant was likely to abscond or otherwise withdraw from the jurisdiction within the meaning of r 42.14 (2) of the Rules;c. The statement of charge filed by the Respondents on 28 March 2017 was defective in that:i.In relation to Charge 1, the Court’s orders of 27 February 2017 were not personally served on the Appellant as required by r 41.07 of the Rules;ii.In relation to Charge 2, the orders of District Registrar Baldwin of 15 December 2016 were not endorsed as required by r 41.06 of the Rules. SECURITY FOR COSTS: RELEVANT PRINCIPLES