Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Limited (No 2)

[2022] FCAFC 1

FEDERAL COURT OF AUSTRALIA

Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Limited (No 2) [2022] FCAFC 1

File number:

QUD 31 of 2021

Judgment of:

ALLSOP CJ, MIDDLETON AND DERRINGTON JJ

Date of judgment:

14 January 2022

Catchwords:

COSTS – question reserved for consideration of the Full Court over objection of the defendant – where outstanding defences raised by the defendant remain for determination – where defendant was unsuccessful on the special case – costs reserved  

Legislation:

Corporations Act 2001 (Cth) s 553C

Federal Court of Australia Act 1976 (Cth) s 25

Cases cited:

Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Limited [2021] FCAFC 228

Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72

Division:

General Division

Registry:

Queensland

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

9

Date of last submissions:

28 December 2021 (Plaintiffs)
24 December 2021 (Defendant)

Date of hearing:

Determined on the papers

Counsel for the Plaintiffs:

Mr J McKenna QC and Mr P O’Brien

Solicitor for the Plaintiffs:

Taylor David Lawyers

Counsel for the Defendant:

Mr G McNally SC with Mr J Pokoney

Solicitor for the Defendant:

Breene & Breene Solicitors

ORDERS

QUD 31 of 2021

BETWEEN:

GAVIN MORTON AS LIQUIDATOR OF MJ WOODMAN ELECTRICAL CONTRACTORS PTY LTD

First Plaintiff

MJ WOODMAN ELECTRICAL CONTRACTORS PTY LTD (IN LIQUIDATION) ACN 602 067 863

Second Plaintiff

AND:

METAL MANUFACTURES PTY LIMITED ACN 003 762 641

Defendant

ORDER MADE BY:	ALLSOP CJ, MIDDLETON AND DERRINGTON JJ
DATE OF ORDER:	14 JANUARY 2022

THE COURT ORDERS THAT:

1.Costs of the case stated for the Full Court be reserved and remitted to the docket judge for determination pending the determination of the remainder of the issues by that judge.

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

REASONS FOR JUDGMENT

THE COURT:

1. On 16 December 2021, the question reserved by Derrington J for consideration of the Full Court pursuant to s 25(6) of the Federal Court of Australia Act 1976 (Cth) was answered “no” by the Full Court: see Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Limited [2021] FCAFC 228. By the orders of the Full Court, the parties were given 14 days to submit an agreed order as to costs but failed to do so. Accordingly, submissions were filed on the question of costs.

2. The plaintiffs, who were successful on the special case, contended for the “usual” order as to costs to be made in this matter. 

3. The defendant made two alternative submissions:

   (1)that the plaintiffs pay the defendant’s costs of the special case; or

   (2)that there be no order as to costs of the special case.

4. In support of these submissions, the defendant relied upon Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at 122–123 [134] to support the proposition that in circumstances wherein a decision of a court is in the public interest, and in this case is of direct benefit to insolvency practice generally within Australia, the usual outcome that costs follow the event need not necessarily be reached. The defendant submitted that it is appropriate in the circumstances that there be no order as to costs, which, it was submitted, is common in test cases such as this.

5. The defendant submitted that the matter was referred to the Full Court over its objection on the basis that bifurcation of the proceedings may add significantly to the costs of those proceedings.  The defendant opposed the application in view of the fact that the special case would not dispose of the proceedings if the plaintiffs succeeded, as they did, given the number of other pleaded defences to the plaintiffs’ claim.

6. The defendant further submitted that the special case was only brought in light of both funding, and an indemnity received by the plaintiffs from the Commonwealth.  In circumstances where the plaintiffs’ costs of the special case were funded by the Commonwealth, it was submitted that the defendant’s valuable role of contradictor ought also be, in effect, funded by the Commonwealth through the mechanism of a costs order.

7. The plaintiffs, in contrast, submitted that it was the defendant which raised what was alleged to be a complete defence under s 553C of the Corporations Act 2001 (Cth), and that, upon raising such a defence, it was efficient to deal with it as a preliminary point. In raising such a defence, it was submitted, the defendant advanced its own financial interest as a party to the proceeding. This matter was not, therefore, an example of public interest litigation: The defendant here had something to gain from raising the defence. The plaintiffs further submitted that the Commonwealth provided funding to the plaintiffs in circumstances in which it was a creditor in the liquidation. In such circumstances, it was submitted that this was not an appropriate case for a departure from the usual rule as to costs.

8. With respect, the parties’ submissions concerning public interest litigation and the appropriate orders as to costs in ‘test cases’ are not entirely to the point.  The negative answer given to the question reserved by Derrington J is not dispositive of the matter:  the defendant has pleaded two further defences.  It is possible that the defendant may still succeed with respect to those additional defences: and win the case.  The question was reserved for the consideration of the Full Court over the objection of the defendant.  In these circumstances, if the defendant were to succeed with respect to those further defences, the special case, while fully argued, may be of no moment as between the parties (though of significance to insolvency practice generally in Australia).  In such circumstances, it may therefore be the case that the order of costs ought to account for the costs incurred by the defendant in fully arguing the special case, against its wishes.  If the defendant were not to succeed with respect to the further issues, it may be appropriate that it bear the costs of the special case, or at least a proportion of them, as well as the costs for the remainder of proceeding. 

9. The object of the jurisdiction conferred to award costs is to permit the just and fair allocation of the costs which the parties have necessarily incurred:  Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at 123 [134]. Fairness is here served by reserving the costs of the special case for determination by the docket judge upon the resolution of all outstanding issues between the parties by that docket judge.

I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop and Justices Middleton and Derrington.

Associate:

Dated:       14 January 2022