Parbery v Toda

[2007] NSWSC 1163

CITATION:	Parbery v Toda [2007] NSWSC 1163
HEARING DATE(S):	15/10/07, 16/10/07
JUDGMENT DATE :	16 October 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	16 October 2007
DECISION:	Plaintiffs to pay costs of first, third, fourth and fifth defendants. Such costs not to be claimed as secured by mortgage under which first and second plaintiffs were appointed receivers by third plaintiff or as costs of receivership or to be recoverable from third defendant or any persons who have guaranteed or secured the third defendant's liability to the third plaintiff
CATCHWORDS:	PROCEDURE - costs - where no determination on the merits - where principal claims formulated in such a way that they would have failed - where first defendant offered consensual resolution that would have avoided ex parte relief
LEGISLATION CITED:	Corporations Act 2001 (Cth), s.431
CASES CITED:	Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622
PARTIES:	Stephen James Parbery (in his capacity as joint and several receiver and manager of McArthur Corporation Pty Ltd) (Receivers and Managers appointed) - First Plaintiff Christopher Clarke Hill (in his capacity as joint and several receiver and manager of McArthur Corporation Pty Ltd) (Receivers and Managers appointed) - Second Plaintiff GE Commercial Corporation (Australia) Pty Ltd - Third Plaintiff Carlos Toda in his personal capacity and trading as Carlos Toda & Co Commercial Lawyers - First Defendant Ross Phillip Mottershead and Murray Roderick Godfrey trading as RMG Partners - Second Defendant McArthur Corporation Pty Ltd (Receivers and Managers Appointed) - Third Defendant Jon Charles McArthur - Fourth Defendant Richard Walter Fritsche - Fifth Defendant Cromwell Corporation Limited - Sixth Defendant Paclib Industrial Pty Limited - Seventh Defendant
FILE NUMBER(S):	SC 4961/07
COUNSEL:	Mr R.G. Forster SC - Plaintiffs Mr S.A. Gregory - First, Third, Fourth and Fifth Defendants Ms R. MacAlpine, Solicitor - Sixth Defendant
SOLICITORS:	Henry Davis York - Plaintiffs Philip Gengos & Co - First Defendant Toda & Co Commercial Lawyers - Third, Fourth and Fifth Defendants Minter Ellison - Sixth Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY, 16 OCTOBER 2007

4961/07 STEPHEN JAMES PARBERY & 2 ORS v CARLOS TODA & 6 ORS

JUDGMENT – on costs

1 These proceedings were commenced on 11 October. The first and second plaintiffs are receivers of a property at Seven Hills owned by the third defendant. They were appointed receivers by the third plaintiff, a financier, which holds security over the property. There are other parties as well. The only ones I need mention are the first defendant, who is the solicitor for the third defendant, and the fourth and fifth defendants, who are the directors of the third defendant.

2 I am dealing now with questions of costs as between the plaintiff on the one hand and the first, third, fourth and fifth defendants on the other.

3 The plaintiffs sought, on an urgent basis, orders that all defendants, including therefore the first, third, fourth and fifth defendants, permit the first and second plaintiffs to inspect any books of the third defendant insofar as they relate to the mortgaged property. When obtaining an order abridging time for service, the plaintiffs also obtained ex parte an order directed to the first defendant (that is the solicitor for the third defendant mortgagor) restraining him, until yesterday, from seeking to modify the hard drive of his computer.

4 When the originating process came before the court yesterday on its first return, the matter was ultimately disposed of as between the plaintiffs and the first, third, fourth and fifth defendants on a consensual basis which involved an agreement about examination of the computer hard drive and acceptance by the plaintiffs of the proposition that, in view of what had been produced by way of documents, there was no need for it ultimately to press its claims for relief. The agreement for examination of the hard drive included a regime for inspection of it by an independent expert, to be selected in a manner the parties agreed.

5 Because there has been no determination on the merits, a starting point in relation to costs is that each side should bear its own costs and there should be no order as to costs: see, for example, Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622. As the plaintiffs view matters, that is not only a starting point but also should be the end point.

6 The defendants in question say, however, that they should have a costs order against the plaintiffs. That proposition needs separate examination in relation to the first defendant (that is, the solicitor) and in relation to the third, fourth and fifth defendants (the mortgagor company and its directors). I take them in reverse order.

7 The order sought against the third, fourth and fifth defendants was an order that they allow inspection of books of the company relating to the Seven Hills property. The application was based on s.431 of the Corporations Act 2001 (Cth) which is as follows:

“ Controller may inspect books

A controller of property of a corporation is entitled to inspect at any reasonable time any books of the corporation that relate to that property and a person must not fail to allow the controller to inspect such books at such a time.”

8 The section imposes a prohibition, in that it says a person must not fail to allow the controller (here, the receivers) to inspect books at any reasonable time. The third, fourth and fifth defendants say that no such order could have been made against them because they never failed, by way of either mere inaction or active refusal, to allow inspection of anything; and the simple reason is that they were never asked to allow inspection of anything.

9 There is force in this. The correspondence on which the plaintiffs rely is correspondence with the first defendant, who is the solicitor. There is room for an inference that the third, fourth and fifth defendants had acknowledged that contact with them could be made through the solicitor. But even allowing for that, there is no evidence that the third, fourth and fifth defendants were, through the solicitor, asked for anything by way of inspection of books. All that was asked for, as I shall explain in greater detail presently, was the solicitor’s files in relation to the sale of the property and that request was directed, naturally enough, to the first defendant as the solicitor.

10 I accept therefore that the application was doomed to fail as against the third, fourth and fifth defendants.

11 As to the first defendant, that is the solicitor, there was, as I have said, a request in relation to certain of his files. I do not need to traverse all of the correspondence, but it is relevant to note that the solicitors for the third plaintiff (the financier) wrote to the first defendant on 8 October saying that their client had appointed the first and second plaintiffs as receivers and that they also acted for the receivers. Then followed a reference to the sale of the Seven Hills property and a request that "you make your files in relation to the proposed sale available for our collection at 4.30pm today".

12 The first defendant replied on the same day asking, quite reasonably, for an explanation of the basis on which an entitlement in terms of the request was made. The request, it will be noted, was that the solicitor’s files be made available “for our collection”.

13 The next day, 9 October, the solicitors for the plaintiffs favoured the first defendant with a copy of the instrument of appointment of receivers. Attention was then directed, in the covering letter, to s.431 of the Corporations Act and clause 13.5 of the mortgage document. The former was said to be the source of an entitlement for "our client" (which of the three is not stated) "to inspect your files in relation to the purported sale of the property". The mortgage clause, of course, was irrelevant to any obligation of the solicitor.

14 Then, after referring to "your refusal to cooperate within the nominated time frame", the plaintiffs’ solicitors said in the covering letter that they were instructed to attend at the first defendant's office at 3 pm on that same day "to collect those files" or, in the first instance, to inspect them.

15 At a later time on 9 October, the first defendant wrote a letter to the solicitors for the plaintiffs as follows:

“We refer to your letter of 9 October 2007.
We refute your assertion that we have failed to co-operate and delayed. At 10:45am yesterday you faxed a letter advising that you act for receivers appointed by your client, GE Commercial Corporation (Australia) Pty Ltd, and requesting that we make our file regarding the proposed sale of 1 Powers Rd, Seven Hills and a copy of the valuation prepared by Landmark White dated 17 September 2007 available for collection by you at 4:30pm that day.
On the same day we replied seeking copies of the documents evidencing the appointment of the receivers and your advice as to the legal basis upon which you assert an entitlement to make the request.
At 8:45 this morning you replied. For the first time you provided us with a copy of the document appointing the receivers. In addition, rather than requiring production for collection you revised your request to ‘collect(ing) those files, or otherwise, at first instance, inspect(ing) them’ at 3:00pm today.
Until your letter of today, you did not suggest that the matter was urgent. Even your letter of today did not set out any reason why the receivers are being ‘prejudiced’ in their ‘ability to undertake their work and to discharge their obligations’.
We are entitled to reasonable notice (see inter alia, Re Jet Corporation of Australia Pty Ltd [1985] VR at 719-720) and a reasonable amount of time within which to consider our obligations as solicitors for the Company.
That said, with a view to assisting and subject to one matter, we have made available for inspection at our offices at 4:00pm today the following documents constituting our file relating to the sale of 1 Powers Rd, Seven Hills:
(i) Contract For Sale of Land dated 27 September 2007;

(ii) Valuation by LandMark White dated 20 November 2005;

(iii) Updated valuation by LandMark White dated 17 September 2007;

(iv) Emails passing between ourselves and Cromwell Corporation Limited leading up to exchange of contracts.
The ‘Inbox’ of the writer’s computer has recently deleted all emails received in the period 4 September to 5 October 2007. We have been advised by our computer technician that this occurred because of the number of emails in it exceeded its stable capacity. The emails produced to you today include such of the emails which constitute communications relating to the sale of the property as were deleted, which were reproduced in the ‘Sent’ box due to them being re-sent in a ‘Reply’. We have commissioned our computer technician to attempt to reproduce from the writer’s hard drive the emails deleted from the ‘Inbox’. Should there by any emails which are not in those made available today, we will provide copies to you in due course.
The documents listed in (ii) and (iii) were not in our possession but were today delivered to us by our client to permit you to inspect them.
We note that we also arranged for copies of the valuations and emails to be available for you to take with you. We understand that you already have a copy of the contract.”

16 Two days later, the plaintiffs approached the court without notice to the first defendant.

17 The first defendant's letter of 9 October showed him to be cooperative rather than obstructive. He offered inspection of copies of "the following documents constituting our file relating to the sale". He then candidly volunteered some information about a situation with his computer hard drive which might have meant that some relevant e-mails predating the plaintiffs’ request for the files relating to the sale had been deleted from the computer.

18 I am satisfied that the orders sought on the basis of s.431 would not have been made against the solicitor. He had indicated availability for inspection at 4pm on 9 October of copies of "the following documents constituting our file" - and I emphasise the word "constituting". And to the extent that the order referred to "any books" of the company "insofar as they relate to the property", the order would not have been made because there had been no request wider than the request for the solicitor’s files relating to the sale; and, since the documents “constituting” the file had been made available, there was no failure of the kind on which s.431 is predicated.

19 Furthermore, the plaintiffs have accepted in court, in relation to the matter of the hard drive and attempts to retrieve data apparently lost in the way outlined in the first defendant's letter of 9 October, the consensual regime to which I have referred. There is no reason to think that that could not have been worked out between the parties in the absence of these proceedings.

20 In summary, therefore, the orders sought against the first, third, fourth and fifth defendants, with respect to access to books, would not have been made and, as regards the matter of the hard drive content, it has been shown that there was no need for the restraining order made on 11 October or, for that matter, for the court to be approached at all.

21 I therefore order that the plaintiffs pay the costs of the first, third and fourth defendants of the proceedings.

22 Furthermore, since it would be wrong for the impact of the costs order to be visited ultimately on the mortgagor company (that is the third defendant) and indirectly on its principals (the fourth and fifth defendants), I will make an order to the effect that the costs the subject of the costs order not be claimed by the plaintiffs as secured by the mortgage under which the first and second plaintiffs were appointed receivers by the third plaintiff, and will not be recoverable from the third defendant or any guarantor of the obligations of the third defendant. I would ask counsel to formulate such an order.

[Matter stood down]

23 I order that the costs of the first, third, fourth and fifth defendants to be paid by the plaintiffs pursuant to the foregoing order not be claimed by the plaintiffs as secured by the mortgage under which the first and second plaintiffs were appointed as receivers or as costs of the receivership and not be recoverable from the third defendant or any persons who have guaranteed or secured the third defendant's liability to the third plaintiff.

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