Neylon, K.D. v Blue Grass Developments P/L

[1994] FCA 451

JUDGMENT No, ...m 2

IN THE UATTER OF BLUE GRASS DEVELOPMENTS PTY. LTD.

ACN 059 663 231

BETWEEN :  ~ 9 A ~ - U U H

Applicant

M D :

Respondent

8	-	Drummond J
-1	13 July, 1994
MmEJwE:	Brisbane

P:

1.         No order be made am to

RECEIVED
IS JUL 1994
FEDERAL OOORT OF

AUBTRAUI

Rmm

m:	Settlement and entry of orders is dealt with in
Order 36 of the - .

THE P V T OF AUsTRBLIB 1 No. QG 3004 of 1994

1 1

IN THE MATTER OF BLUE GRASS DEVELOPMENTS PTY. LTD.

ACN 059 663 231

BETWEEN:

Applicant

AND :

Respondent

U U m I	Drummond J
RaSQ:	13 July, 1994

USQ: Brisbane

REASONS FOR JUXMENT

I have before me the question of what order as to costs I should make in the present proceedings which were brought by Blue Grass Developments Pty. Ltd. to strike out the winding up petition presented against it by Hr Neylon.

out &. Neylon's winding up application on the ground that In the judgment I gave on 27 June, 1994, I atruck	there was a genuine dispute on substantial grounds ae to
whether it was the company rather than a Mr. Dawson, the husband of one of the directors of the company, who was Mr. 19eylon1s debtor. However, in the course of the judgment, I referred to certain curious features concerning the behaviour of the company and its involvement in the transaction which it aays was one limited entirely to a transaction between Mr. Dawnon and Hr. Neylon and in which it had no part. I said in thia context that "it wan thus not a fanciful suggestion that the loan was made between Hr. Neylon and the company and that the debt a therefore owed by the company", even though I ultimately came to the conclusion that the winding up proceeding6 were inappropriate, given the nature of the diapute that emerged, largely from Mr. Neylon'e own evidence.
The prima facie rule ie that the company, aa the muccesaful party, ehould have ite coeta of the proceedings. But that ia by no meana an invariable rule. Courte eeem to me to be more ready in recent thee to depart from that rule. In
a judgment I gave earlier in the year: v - Trout PtvL
m V - v Ptv. Ltd, (unreported, 8 February, 1994,
DrUplppond J) in depriving a eucceesful reapondent of his costa of the proceedinga, I reviewed the relevant cases. The legal
position, in my view, i as eet out in my judgment in

". . . It can be proper to deny auch a succeeaful

reapondent the whole or part of his coete.	The conduct of a respondent that gives rise to the	diapute will rarely be relevant to whether a
eucce~eful reepondent ehould be deprived of any of
him coeta, although lLQnea v [l9641 1 W.L.R.
960 provide6 an example of jumt much conduct justifying the refusal of coatm to a eucceaeful reepondent. Conduct of a succeeaful respondent at, or in connection with, the running of the litigation itself in relevant to the exerciae of the diecretion to deprive him of eome or all of him coats. If the rempondent'a conduct hae unnecemearily prolonged the trial, that will clearly justify the exercise of the
comta diacretion againat him: aee C - v
113 A.L.R. 285 at 327. But the diecretion ia much wider than that. Ptv. Ltd. v m
e Co. Lt& [l9911 1 V.R. 129 wae a caae in which the exerciee of the wholly exceptional power of the trial judge not merely to deprive a succeseful defendant of ite coete but to order that it pay the uneuccessful plaintiff's coeta up to and including the firet day of the trial (and on a eolicitor and own client taxation ae well) wae affirmed. The decieion contains a detailed discuseion by Kaye J, with whom McGarvie J agreed, of the nature of the general diecretion vested in the Court by provisions eimilar to a. 43 the Federal

urt of Aus ~ c t 1976. His Honour rejected

f9e approach *kin LJ in v [l9221

B . 47 in seeking to limit the exercise of the discretion to deprive a eucceesful respondent of his costs to circuraetancee that fell within one of three categories. Kaye J contrasted this approach with that of Lord Sterndale in the eame caee, an approach eubsequently approved in -bell h Co. LtdL

v [l9271 A.C. 732. Kaye J said, at 153-1541

'[Tlhe Lord Chancellor [in u d -be11 &

a v -1, at page 811-812, after

approving the statement of Lord Sterndale said:

'A eucceseful defendant in a non-jury case hae no doubt, in the abeence of special circumetances, a reasonable expectation of obtaining an order for the payment of his costs by the plaintiff; but he has no right to coats unless and until the Court awards them to him, and the Court has an abeolute and unfettered diecretion to award or not to award them. This discretion, like any other discretion, must of course be exercieed juaicially, and the judge ought not to exercise it against the successful party except for

some reason connected with the case. . . .

But when a judge, deliberately intending to exercise hie diecretionary powers, has

acted on facts connected with or leading

up to the litigation which have been proved before him or which he has himself observed during the progrese of the case, then it seeme to me that a Court of Appeal, although it may deem his reasons insufficient and may disagree with hie conclusion, is prohibited by the statute from entertaining an appeal from it.'"

In this case it eeeme to me that where the dispute is whether there is a debt owing only by Mr. Daweon to Mr. Neylon, or a debt owing by the company, on whose behalf Mr. Neylon, or a debt owing by the company, on whose behalf Mr. Dawson contracted as agent to leave wholly unexplained two very curious features, suggesting that the company is much more than a bystander to the transaction, is sufficient ground to entitle me to depart from the general rule and to decline to make an order for costs in its favour.

The two features that I have mentioned which the company has not explained are, firstly, the fact that Mr. Dawaon was able to offer, in order to procure the loan from

Hr. Neylon, security, not over cattle to which he had any

claim, but over cattle of which the company alone was the owner. Secondly, the stock mortgage which Mr. Daweon granted over the company's cattle to procure the advance from Mr. Neylon bears the company seal signed through by the company's directors. The only explanation offered is that that was done

by way of witnessing the execution of the document. But for a

company to go to the trouble of placing its seal on such a document in circunmtances such as this needs, to my mind, more

particular aspect of the evidence. explanation than that. A real question mark is raised by that For these reasons, I therefore propose to make no

order as to costs.

Hr. Neylon, in the course of the submissions he made

this morning, referred to a number of matters not in evidence but which were generally critical of both Mr. Dawson and the

company. I record that I have disregarded these matters.

I certify that this and the preceding
four pages are a true copy of the
reasons for judgment herein of the

Honourable Hr. Justice Drumond.

Date :	13 July, 1994
The applicant appeared in person.
Counsel for the respondent:	P. Sacre
Solicitors for the respondent:	Toogoods
Date of Hearing:	13 July, 1994