Re Allan Fitzgerald Pty Ltd (in Liq)

[1995] QSC 12

IN THE SUPREME COURT  

OF QUEENSLAND  

Apn No. 147 of 1987

Brisbane

Before the Hon. Justice G N Williams

[Re Allan Fitzgerald Pty Ltd (in liq)]

IN THE MATTER of the Corporations Law

- and -

IN THE MATTER of ALLAN FITZGERALD PTY LTD (IN LIQUIDATION)

JUDGMENT - G N WILLIAMS J

Judgment delivered  24/02/1995

CATCHWORDS:     Costs - Taxation - cross applications - liquidator seeking declaration numerous payments void - creditor seeking validation of two payments - s.368 Companies Code - both successful and losing party ordered to pay costs on each application - held appropriate to tax creditors application as if successful counter-claimant - Smith v. Madden (1846) 73 C.L.R. 129 considered.

Counsel:D. North for applicant

Lilley for respondent

Solicitors:John P. Kelly & Co. for applicant

Sly Weigall Cannan Peterson for respondent

Hearing Date:   16 February 1995

IN THE SUPREME COURT  

OF QUEENSLAND  

Apn No. 147 of 1987

IN THE MATTER of the Corporations Law

- and -

IN THE MATTER of ALLAN FITZGERALD PTY LTD (IN LIQUIDATION)

JUDGMENT - G N WILLIAMS J

Judgment delivered 24/02/1995

In the winding-up of Allan Fitzgerald Pty Ltd the liquidator applied by application filed 30 March 1988 for a declaration that certain payments totalling $323,519.91 to A.P.A. Transport Pty Ltd, the present applicant, were void against the liquidator as preferences, and further for a declaration that two payments made in April and May 1987 were void against the liquidator pursuant to the provisions of s.368 of the Companies (Queensland)Code.
           Then by application filed 13 April 1988 the present applicant sought orders validating those two payments made in April and May 1987; such application was made pursuant to s.368(1) of the Companies (Queensland) Code.
           Each application was got ready for trial and both matters ultimately came on for hearing before Lee J. on 30 November 1992.  On that day he ordered by consent that the evidence in the one application be evidence in the other.  Thereafter the hearing of both applications proceeded over five days.
           The trial Judge essentially found for the liquidators so far as the preferential payments were concerned, but validated, on the applicant's application, the two payments made in April and May 1987.  An appeal by each party against that decision was substantially dismissed (Starkey v. A.P.A. Transport Pty Ltd (1993) 12 A.C.S.R.15).
           When Lee J. handed down his reasons there was an argument as to costs.  On that occasion counsel for the liquidator submitted that the Judge should award four-fifths of the costs to the liquidator and one-fifth to the present applicant.  The trial Judge declined to make that order but instead ordered on each of the applications that the losing party pay taxed costs.  In other words, on the applicant's application the liquidator was ordered to pay the applicant's costs of and incidental to the application to be taxed.
           Subsequently the applicant submitted a bill in taxable form; it is not unfair to say that it included most, if not all, items referable to the applicant's defence of the claims made by the liquidator as well as his own application for validation of the two payments.  The bill as delivered was in the total sum of $51,979.87.  The bill was taxed by the Taxing Officer on 7 September 1994, and costs were allowed in the sum of $9,902.91.  The applicant objected to the decision of the Taxing Officer which was primarily based on the premise that the applicant was a counter-claimant to the liquidator's application and costs should be taxed on that basis.  The grounds stated in the Objection to Taxation were as follows:-

"1.That there were two separate actions each commenced by way of Application by the respective parties.

2.On the first morning of the trial, the Honourable Mr Justice Lee made an Order that the Liquidator's application and A.P.A. Transport Pty Ltd's application be heard together and that the evidence in one be taken as the evidence in the other.

3.That these matters could have been heard separately but were heard together in order to save time. 

4.It is unfair, when both Applicants were only partially successful at first instance in their Applications to tax the bills on this basis simply because the Application of the Liquidator was filed prior to the Application of A.P.A. Transport Pty Ltd.

5.That in making the costs orders at the conclusion of his judgment, Mr Justice Lee declined to make an Order as was suggested to him by Counsel for the Liquidator of awarding four-fifths of the costs to the Liquidator and one-fifth to A.P.A. Transport Pty Ltd, but instead made an order in favour of each successful party and did not specify that one was to be regarded as a Counter‑claim."

The Taxing Officer delivered Answers to those objections dated 25 November 1994.  He recited a brief history of the litigation and noted that the Objection did not specify any particular items as being the subject of the Objection.  His approach is to be gleaned from the following passages:-

"I am told that the Court refused an application to award costs to the liquidator in respect of both applications on an apportionment (four-fifths of total costs) basis.  It is therefore argued that by so doing, the Court intended some greater indemnity in respect of A.P.A.'s costs than would have been the case if such had been made.

The Court gave no reasons on its decision as to costs, and the extent of the considerations given to that application are not known.  I do not consider it appropriate in the circumstances for me to speculate as to the Court's intention in that regard.

There is no dispute that additional work was done for the purpose of the validation application and that those costs would otherwise not have been incurred.  Such costs have been allowed.  Many items in the bill however were either disallowed or reduced because they were either not necessary or proper items in terms of O.91 R.S.C., or because they were costs which related wholly to the liquidator's application and should not have been claimed in the bill in any event.

Costs which would have been ordinarily incurred in relation to opposing the liquidator's earlier application, but which now because of this application are common costs, were not allowed in part or whole.  It was argued that as soon as A.P.A. filed this application that such costs should thereafter be apportioned (although no attempt has been made to do this in the bill of costs and nothing has been suggested as to the degree of any such apportionment). 

It is my opinion that both costs orders made that day must be taken into consideration as well as the circumstances and nature of both applications in order to properly determine the most just approach to be taken.  Cases such as Smith v. Madden (1946) 73 C.L.R. 129, Medway Oil and Storage Company Limited v. Continental Contractors Ltd. (1929) A.C. 88, The Stentor (1934) P.33 are of assistance in such a consideration.

...

In my view the present applications are analogous to a claim/counter-claim or appeal/cross-appeal situation and the costs of the cross application should be treated according to the principles applied thereto."

The applicant has now sought a review of that decision.  Principally the applicant seeks an order

"that the Taxing Officer be directed to tax the costs ordered to be paid to A.P.A. Transport Pty Ltd on the basis that it was a successful applicant and not on the basis that it was a successful counter-claimant".

In my view the question which now arises for determination must be determined in the light of the events which happened.  It is not to the point to say that the applicant could have applied for an order validating the payments prior to, or independently of, the liquidator making an application for a declaration that such payments were void against him.  The fact is that the liquidator made his application first in point of time, and once that was done the applicant had no option, if it wished to retain the monies, other than to apply for a validation order.  That had to be done by a separate application, but the only logical procedural step for the parties to take was to have both applications heard together. 
           It should also be remembered that the liquidator, instead of applying in the winding up proceeding for a declaration and consequential orders, could have commenced and action for money had and received with respect to the alleged void payments.  If he proceeded in that way, then the applicant would have, in practical terms, been obliged to counter-claim for a declaration validating the payments.  If that procedure had been followed then there would have been a true claim and counter-claim situation. 
In all the circumstances I cannot see that the claim/counter-claim analogy is inappropriate. When one considers s.4(8) of the Judicature Act and O.22 r.3 there is no reason in law why the application for validation of the payments could not be properly made as a counter-claim.  Because the procedure adopted did not formally require the exchange of pleadings, the same result was achieved by making an order that the two applications be heard together.  It was always envisaged by the parties that such an order would be made.  The observation of Mathew J. in Hood Barrs v. Cathcart (1895) 1 Q.B. 873 at 875 is relevant:-

"It is perfectly clear that a counter-claim is equivalent to a cross-action, and is instituted as a cross-action;  there is the closest analogy between raising a counter-claim and instituting an action."

The Taxing Officer was correct in following the guidance given by Dixon J. in the course of his judgment in Smith v. Madden.  That case is important for a number of reasons.  At 133 that learned Judge pointed out that at common law apportionment was not practised.  Apportionment was a procedure followed in the Court of Chancery and involved an apportionment between different parts of the cause or matter of the general costs of the suit.  In dealing with the approach of the common law Dixon J. said at 133-4:-

"In such a case the taxation of the costs of the action and of the counter-claim is governed by the principle that the party receiving the costs of the claim should recover the general costs and whatever was reasonably incurred in bringing and maintaining or defending the action, as the case may be, considered as if there had been no counter-claim, and the party receiving the costs of the counter-claim should recover the further or increased costs reasonably incurred in bringing and maintaining or defending the counter-claim."

In my view there is an onus on the solicitor delivering the bill for the counter-claim or cross-action to limit it to costs incurred with respect to the counter-claim or cross-actin;  here, as noted above, the applicant's solicitors made no attempt to do that.  The adoption of that approach is important because of a later passage in the judgment of Dixon J.:-

"But, although there can be no apportionment of items of costs between the two parts of the cause, it may be necessary to divide an item of costs in two parts.  This will occur when there is a single charge for work but a several part of that work relates to the claim and the other several part of the work relates to the counter-claim.  It will then be necessary to divide the single charge in accordance with the two classes of work it covers.  Divisions of charges in this way must be distinguished from apportionment, but it is easy to see that, under cover of division, apportionment in the sense of the Chancery practice may really be applied." (136)

That is the approach the Taxing Officer adopted here.  For example, counsel charged a single fee on brief and a single refresher for each of the following four days.  Those fees obviously covered his work both with respect to the liquidator's claim and the applicant's claim.  The Taxing Officer allowed part of the fee on brief and part of the first day's refresher as being referable to the applicant's claim; the balance was disallowed.  A similar approach was adopted to a number of other items in the bill being taxed. 
           But that was not always done where the one item in the bill could possibly or arguably have encompassed work relating to each of the applications.  For example, items relating to discovery or inspection of documents which may or could have included documents relevant only to the validation application were disallowed in full.  But in my view the applicant cannot complain of that on this review.  It was for the applicant to demonstrate to the Taxing Officer that some specific costs which were only referable to the validation application were included in the general item; they did not do that.  This review only raises a question of law as to the proper approach to the taxation; it does not challenge the Taxing Officer's decision with respect to any particular item. 
           I cannot see that the Taxing Officer erred in adopting the course that he did.  It was permissible to approach this taxation on the basis that the situation was analogous to that where one party had been successful with respect to its claim and the other had been successful with respect to its counter-claim.
           In any event, whatever words were used by the Taxing Officer to describe the approach in principle taken, there is only review of error if the wrong result has been achieved.  In the absence of any challenge to specific items disallowed by the Taxing Officer it is virtually impossible for this Court to conclude that a wrong result was achieved.  It is not clear that, if the Taxing Officer had taxed the costs on the basis that the applicant was a successful applicant (as distinct from a successful counter-claimant), any additional items would have been allowed.
           In all the circumstances the summons seeking a review of the taxation should be dismissed with costs.