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Re Locktronic Systems Pty Ltd (No 2)

Re Locktronic Systems Pty Ltd (No 2)

Case [2009] VSC 523 16 November 2009

Costs

Indemnification

Preferential Payments

Corporate Law & Governance

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT
CORPORATIONS LIST

No. 10001 of 2005

RE LOCKTRONIC SYSTEMS PTY LTD (in liquidation) (receivers appointed) (ACN 005 724 149)
GEORGE GEORGES AND JOHN ROSS LINDHOLM (in their capacities as joint and several liquidators of LOCKTRONIC SYSTEMS PTY LTD (in liquidation) (receivers appointed) and LOCKTRONIC SYSTEMS PTY LTD (in liquidation) (receivers appointed)	Plaintiffs
v
THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA	Defendant
and
PETER KING	First third party
MICHAEL DAVID WALSH	Second third party
JOHN ANDREAS NISSEN	Third third party

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	15 September 2009
DATE OF JUDGMENT:	16 November 2009
CASE MAY BE CITED AS:	Re Locktronic Systems Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2009] VSC 523

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CORPORATIONS – application for costs - plaintiffs and defendant Commissioner of Taxation consent to judgment against the Commissioner to recover preferential payments of tax under s 588FF of the Corporations Act 2001 – Commissioner proceeds against third party directors to be indemnified under s 588FGA(2) of the Corporations Act 2001 – whether Commissioner or third parties ought to pay plaintiffs’ costs for period after Commissioner admits plaintiffs’ claim – third parties ordered to pay costs for period after Commissioner admitted plaintiffs’ claim - rule 11.09 Supreme Court (General Civil Procedure) Rules 2005

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P D Crutchfield	Middletons
For the Defendants	Ms E Strong SC with Mr S D Hay	Wisewould Mahony
For the Firstnamed & Thirdnamed Third Party	Mr G T Bigmore QC with Mr P Fary	McDonald Partners
For the Secondnamed Third Party	In person

Allen v Oakey (1890) 62 LT 724
Archard v Ellerker (1888) 10 ALT 196
A Team Diamond Headquarters Pty Ltd v Main Road Property Group Pty Ltd [2009] VSCA 208
Commissioner of Taxation v Sims [2008] 72 NSWLR 716; [2008] NSWCA 298
Donald Campbell & Co Ltd v Pollak [1927] AC 732

Duncan v Commissioner of Taxation [2006] FCA 885
Keddie v Foxall [1955] VLR 320
London Steam Dyeing Co v Digby (1888) 36 WR 497
Noxequin Pty Ltd v Deputy Commissioner of Taxation [2007] NSWSC 87
Ritter v Godfrey [1920] 2 KB 47
Sims v Commissioner of Taxation [2007] NSWSC 1359
Trickey v Maynard (1893) 5 QLJ 115

HIS HONOUR:

By an originating process of 19 December 2005, the first and second plaintiffs, the liquidators of Locktronic Systems Pty Ltd (in liquidation) (receivers appointed) (“Locktronic”) and the third plaintiff, Locktronic, applied under s 588FF of the Corporations Act 2001 for orders and declarations that certain alleged preferential payments entered into between Locktronic and the defendant, the Commissioner of Taxation, are insolvent transactions of Locktronic which are voidable by the liquidators pursuant to s 588FF of the Act.

By an amended third party notice of 23 March 2007, the Commissioner claimed to be entitled to be indemnified by the third parties, who had been directors of Locktronic, under s 588FGA of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Locktronic Systems Pty Ltd (No 2)

Details

AGLC: Re Locktronic Systems Pty Ltd (No 2) [2009] VSC 523
Case: [2009] VSC 523
Decision Date: 16 November 2009

CaseChat Overview and Summary

Locktronic Systems Pty Ltd was the subject of an application for costs by the plaintiffs after a judgment against the Commissioner of Taxation. The case involved a dispute over preferential payments made by the company to the plaintiffs, as well as the Commissioner's pursuit of third-party directors for indemnification. The court had to decide whether the Commissioner or the third parties were responsible for the plaintiffs' costs incurred after the Commissioner conceded to the plaintiffs' claims. The central legal issue was the interpretation and application of sections 588FF and 588FGA(2) of the Corporations Act 2001, along with rule 11.09 of the Supreme Court (General Civil Procedure) Rules 2005.

The court examined the statutory provisions and relevant case law to determine the appropriate party to bear the costs. The plaintiffs argued that the Commissioner, having conceded to their claims, should be responsible for all costs incurred. The Commissioner contended that the third parties should be liable for the costs incurred after the concession, given the nature of the claims against them. The court ultimately ruled that the third parties were responsible for the costs incurred after the Commissioner admitted to the plaintiffs' claims, aligning with the principles outlined in rule 11.09 of the Supreme Court (General Civil Procedure) Rules 2005.

The court's reasoning hinged on the interpretation of the statutory framework and the procedural rules governing costs in civil litigation. It found that the third parties, who were being pursued for indemnification, should bear the costs incurred after the Commissioner conceded the claims. This decision was grounded in the understanding that the third parties' liability was distinct from that of the Commissioner, and the costs should reflect the specific claims against them.

The court ordered the third parties to pay the plaintiffs' costs for the period after the Commissioner admitted to the plaintiffs' claims. This ruling was consistent with the statutory and procedural provisions, ensuring that the costs were fairly allocated between the parties involved in the litigation.

Orders