NILANT-v- Price & Ors

[1999] WASC 109

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   NILANT-v- PRICE & ORS [1999] WASC 109

CORAM:   MASTER BREDMEYER

HEARD:   8 JULY 1999

DELIVERED          :   30 JULY 1999

FILE NO/S:   COR 138 of 1999

BETWEEN:   CHARLES PHILIPPE LOUIS NILANT (in his capacity as receiver and manager of Gold Coast Holdings Pty Ltd (Receiver and Manager Appointed) (In Liq)) (ACN 050 161 021)

Applicant

AND

ALAN LESLIE PRICE
JAMES CRAIG WEIR
CLEMENCY MARJORIE DRAPER
MARCELINA FERNANDES
GRAHAM HARRY NORMAN
JILLIAN MARGARET NORMAN
LESLIE ALAN NORDHOFF
MARIA ANTONIETTE NORDHOFF
DONALD KEITH HAMES
KAY MARGARET HAMES
FRANCES LEE DAVEY
RIVERTON ESTATE PTY LTD (ACN 008 672 580)
HILDA OBRUCA
EVE SOLOMON
SOLOMON MANAGEMENT PTY LTD (ACN 008 909 779)
ANTHONY DONALD FRISINA
AUDREY JOAN COLLINS
HENRY WILLIAM OGG
BETTY ANITA OGG
WILLIAM ROBERT MARTYN
BETTY ROSE MARTYN
ALEXANDER GEORGE CRANSTON
DORIS MARY CRANSTON
NEIL DANIEL WILLIAMS
JOHN WILLIAM MILLER
MARIA STELLA MILLER
HAROLD WERNER ARNOLD
V J NOMINEES PTY LTD (ACN 008 901 442)
DENNIS JAMES GREGORY
DIANNE JOY GREGORY
JANICE LILA PASS
JOSEPHINE PAMELA CHAMBERS
BETTY BOORN
VINCENZO PANARESE
LINA PANARESE
JOHN ALEXIS BOYCE
DERRELL LORRAINE BOYCE
PETER JOHN CICCOTOSTO
SKIJORING NOMINEES PTY LTD (ACN 009 103 173)
TOME FRANCISCO FERNANDES
CLARENCE MATTHEW HALL
MARY EMELINE HALL
JOHN LEWIS MARSHALL
RUBY MARGARET MARSHALL
SARAH HELEN RODGERS
KIRIKIJIRIT FIRM PTY LTD (ACN 078 479 900)
DIANNE KERRY BINDEMAN
WILLIAM HENRY ANDERTON
CHRISTOPHER JOHN MOORE
HAZEL ERMA GLENISTER
KARINA STEPHANIE MERCHANT
NATIONAL AUSTRALIA TRUSTEES LTD (ACN 007 350 405)
RONALD WILLIAM CHAPMAN
SHARLENE JANE CHAPMAN
Respondents

Catchwords:

Costs - Indemnity order sought - Opposition to application totally misconceived - Indemnity costs ordered

Legislation:

Corporations Law, s 424

Result:

Application allowed in part

Representation:

Counsel:

Applicant:     Mr N P Gentilli

Respondents                 :     Mr J C Giles & Mr S C England

Solicitors:

Applicant:     Jackson McDonald

Respondents                 :     Solomon Bros & Lawton Gillon

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

1. MASTER BREDMEYER:  This is a reserved decision on costs.

2. The background to it is as follows.  The 54 respondents are investors, mainly retirees, who loaned money through a finance broker, Blackburn and Dixon Pty Ltd, to Goldcoast Holdings Pty Ltd which company used the money to purchase 24 units in the Dunsborough Resort Motel.  The motel units all had separate strata titles.  The monies loaned were secured by six mortgages.  Each mortgage had up to 12 mortgagees and was over four units in the motel.  The interest was not paid and the mortgagees, by six deeds of appointment, one for each mortgage, appointed Mr Charles Nilant, the present applicant as receiver and manager of the property.  He had the property valued and eventually, after some difficulty, sold the property by tender.  The purchase price for the 24 units was $1,250,000.  The purchaser did not provide a breakdown of the purchase price into smaller sums for the various units.  The purchaser simply purchased all 24 units for that sum.

3. Mr Nilant has applied under s 424 of the Corporations Law to the court for directions as to how to distribute the net proceeds of sale.  I considered the application was brought properly and well founded and, after a contested hearing, I gave him directions as to how the proceeds should be distributed between the 54 respondents.  I reserved on the question of costs.

4. The receiver and manager had a dilemma over the distribution of proceeds.  As I have said there were six mortgages, each over four motel units.  Mortgage number G600687 was over lots 19, 20, 21 and 22 and mortgage number G00686 was over lots 23, 24, 25 and 26.  These eight lots, or motel units, were each 30 square metres in area.  All the other units, secured by the other four mortgages were over motel units of size 24 square metres.  I think most, if not all of the valuations, valued the larger units as more valuable than the smaller units.  As I have said, the purchaser did not offer separate purchase prices for the different units which made up the sale.  I consider it was necessary for the receiver and manager to apply to the court for directions and he should get his costs.

5. The principal argument before me was whether the distribution to the 54 respondents should be pari passu, meaning that each one would get a share of the purchase money in proportion to his loan, or whether special weight should be given to those seven mortgagees of mortgage number G00687 and the 12 mortgagees of mortgage number 600686 who were lucky enough to have a mortgage over the larger, more valuable, motel units.  I ruled in favour of the latter proposition.

6. Mr Giles, for the first 48 respondents, which I will refer to as the majority, mounted detailed argument as to why I should not give directions.  His argument was under four headings:

   (1) that the applicant in purporting to come under s 424 of the Corporations Law was really seeking a declaration as to the terms of his engagement and that this was wrong;

   (2)     the proceedings had been incompetently commenced and not all the appropriate parties had been joined;

   (3)     alternatively, the applicant was applying for directions as to a commercial decision which the courts will not grant, and

   (4)     as there was only one possible method of distribution ‑ the pari passu method ‑ directions should never have been applied for.

7. His written submissions extend to nine typed pages.  His supplementary submissions covered five pages; his list of authorities covered 18 cases and two text books, and he supplied me with the book of photostat authorities containing 26 cases.  The application took three and a half hours to argue.

8. I consider this opposition was totally misconceived.  It had no chance of success.  The application was properly brought and Mr Giles should have adopted a neutral stance.  I say that because his clients included many of the mortgagees of the smaller units and some, if not all, of the 19 mortgagees with the larger units.  Thus it was impossible for him to have any firm instructions from all of them as their economic interests conflicted.  Mr England, counsel for the remaining six respondents, whom I will refer to as the minority, adopted a neutral stance.  He had no objection to me giving suitable directions to the receiver and manager.

9. Mr England asked that his costs be paid by Solomon Brothers, the solicitors for the majority, on an indemnity basis.  Mr Gentilli, for the applicant, asked that his costs also be paid on an indemnity basis out of the funds held by the receiver and manager.

10. I consider that the applicant, who is, in effect, a trustee should have his costs on a solicitor/client basis.  That is what I think is understood by the term "costs paid out of the common fund".  See Seaman 66.1.15 and 66.11.16.  He should have the costs of the application and the costs of his appearance on 9 June 1999, which was the return date of the application and 25 June 1999 on a solicitor/client basis.  All those costs should come out of the common fund, that is, in effect, to be borne by all 54 respondents.  In relation to the hearing on 8 July 1999, which was the lengthy contested hearing before me, I consider the legal arguments of Mr Giles were wrong and misconceived and should never have been brought, and that it is appropriate that the applicant should have the costs of that day on a solicitor/client basis against the majority respondents.  I consider that if that opposition had not been brought, the directions could have been given after a brief hearing on 25 June.

11. In relation to Mr England's application for a special order as to costs, his appearance was necessary on 9 and 25 June and I consider his costs of the application and of those two appearances should be on a party/party basis and should be paid out of the common fund, that is, by all mortgagees including the ones he represents.  In relation to the hearing on 8 July 1999, I consider that that hearing was unnecessary and was brought about by the opposition of Mr Giles which was totally misconceived, and I consider the minority should have the costs of that day awarded against the majority on an indemnity basis.  I am not willing to make these costs orders against Solomon Brothers as such.  Whether senior partners in that firm, having reviewed the materials, might decide to pay some or all of those costs,  is up to them to decide.  All costs are to be taxed, if not agreed.

12. I will make the following orders:

    2.      The applicant's costs of the application and the costs of appearances for him on 9 and 25 June 1999 are to be paid on a solicitor/client basis out of the purchase moneys to be taxed if not agreed.

    3.      The applicant's costs of the appearance on 8 July 1999 are to be paid on a solicitor/client basis by the 1st to 48th named respondents to be taxed if not agreed.

    4.      The costs of the 49th to 54th named respondents:

    (a) in relation to their counsel's appearances on 9 and 25 June 1999 are to be paid on a party/party basis out of the purchase moneys to be taxed if not agreed; and

    (b) in relation to the hearing on 8 July 1999 are to be paid by the 1st to 48th named respondents on an indemnity basis to be taxed if not agreed.