Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [No 7]
[2016] WASC 329
•13 OCTOBER 2016
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ROSEBRIDGE NOMINEES PTY LTD -v- COMMONWEALTH BANK OF AUSTRALIA [No 7] [2016] WASC 329
CORAM: LE MIERE J
HEARD: 21 SEPTEMBER 2016
DELIVERED : 13 OCTOBER 2016
FILE NO/S: CIV 1235 of 1999
BETWEEN: ROSEBRIDGE NOMINEES PTY LTD
Plaintiff
AND
COMMONWEALTH BANK OF AUSTRALIA
First DefendantCORRS CHAMBERS WESTGARTH (A FIRM)
Second DefendantWFB PTY LTD
Third Defendant
Catchwords:
Costs - Whether application for costs and payment out affected by s471B Corporations Act - Leave not required
Costs - Whether plaintiff should pay costs of defendants - Costs fixed - Whether costs should be paid out of court - Money will be paid out of court - Turns on own facts
Practice and procedure - Application to reinstate a matter dismissed by operation of the Rules of the Supreme Court - Whether irregularity - Whether inherent jurisdiction to reinstate case - Application dismissed - Turns on own facts
Practice and procedure - Money paid into court - Whether order inconsistent with previous order - Money will not be returned
Legislation:
Corporations Act 2001 (Cth), s 471B, s 588FA, s 588FF
Criminal Property Confiscation Act 2000 (WA), s 79
District Court Rules 2005 (WA), r 44G
Rules of the Supreme Court 1971 (WA), O 2 r 1, O 4A r 25, O 4A r 28, O 25 r 7, O 66 r 51
Supreme Court Act 1935 (WA), s 167
Result:
Plaintiff's application fails
Plaintiff pay the cost of the defendants as fixed
Payment will be made out of court
Category: B
Representation:
Counsel:
Plaintiff: Mr S B Watters
First Defendant : Ms K M McNally
Second Defendant : Mr A T Macknay
Third Defendant : Mr M J Lang
Solicitors:
Plaintiff: Brian V O'Haire Lawyers
First Defendant : Clayton Utz
Second Defendant : MDS Legal
Third Defendant : Jackson McDonald
Case(s) referred to in judgment(s):
Al‑Rawi v Security Service [2011] UKSC 34; [2012] 1 AC 531
BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339
Centurion Trust Company Ltd v Director of Public Prosecutions (WA) [2009] WASCA 97
Commonwealth Bank of Australia Ltd v Saraceni [2013] WASC 115
Commonwealth of Australia v Albany Port Authority [2006] WASCA 185
Landsal Pty Ltd (in liq) v REI Building Society [1993] FCA 121; (1993) 41 FCR 421
Leighton v Garnham [No 4] [2016] WASC 134
Rowe v Stoltze [2013] WASCA 92
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [No 4] [2014] WASC 405
Timcal Pty Ltd v Sons of Gwalia Ltd (Subject to Deed of Company Arrangement) [No 2] [2011] WASC 58
LE MIERE J:
Summary
This action was commenced 17 years ago. It concerns events which occurred between 1995 and the commencement of the action in 1999. The plaintiff amended its statement of claim numerous times and on many other occasions unsuccessfully applied to amend it. On 23 February 2004 Master Sanderson ordered the plaintiff to give security for the defendants' costs. Further orders that the plaintiff give security for the defendants' costs were made and the plaintiff made further payments into court as security for the defendants' costs in 2009 and 2010. In 2014 the defendants applied for further security for their costs. The solicitor on the record for the plaintiff did not attend the hearing of the defendants' application for security for costs. I gave leave to Mr Grego, the director of the plaintiff who had been instructing the plaintiff's solicitors, to appear for the plaintiff and make submissions on its behalf. On 20 November 2014 I ordered that the plaintiff give further security for the costs of each of the defendants. I further ordered that unless within 28 days the plaintiff furnished the security, the proceedings should be put on the inactive cases list.
The plaintiff did not furnish the security. On 19 January 2015 the Principal Registrar gave notice that the case has been put on the inactive cases list and should the case remain on the inactive cases list for six continuous months it is to be taken to have been dismissed for want of prosecution.
By originating process dated 17 April 2015 in COR 81 of 2015 Mark Blandford applied for orders winding up the plaintiff. On 2 June 2015 the Master ordered that the plaintiff be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth) and that Robert Jacobs be appointed liquidator for the purposes of the winding up. I will refer to Mr Jacobs in his capacity as liquidator of the plaintiff as the Liquidator.
On 6 July 2015 the Principal Registrar, or his delegate, by letter to Mr Grego and the plaintiff's solicitors on the record, Angove Law, informed the plaintiff that as the matter had been on the inactive cases list for six continuous months without further activity having occurred, pursuant to O 4A r 28(1) of the Rules of the Supreme Court 1971 (WA) (RSC) the matter is now taken to have been dismissed for want of prosecution.
On 7 July, 18 July and 21 July 2016 the first defendant, second defendant and third defendant respectively filed chamber summonses seeking orders that the plaintiff pay the defendants' costs of the action and the costs be paid out of court to the defendants from the security paid into court by the plaintiff. On 1 September 2016 the Liquidator filed a chamber summons seeking an order that the action be reinstated to the CMC list and other ancillary or consequential orders.
For the reasons which follow:
1.the Liquidator's application that the action be reinstated to the CMC list shall be dismissed;
2.the plaintiff shall pay the costs of the action of the first defendant, the second defendant, and the third defendant fixed in the sum of $141,092.50, $152,255.04 and $169,083.18 respectively; and
3.those costs shall be paid out of court to each of the defendants from the security for costs paid into court by the plaintiff.
The Liquidator's application to reinstate case
The Liquidator's primary application is that the dismissal of the case should be set aside and the case should be reinstated on the CMC list. The Liquidator advances several arguments in support of that application.
Failure to give notice to Liquidator is not an irregularity
In his initial submissions the Liquidator submitted that there have been procedural irregularities in the Liquidator not receiving notice of the case being on the inactive list and being dismissed for want of prosecution and therefore in accordance with Leighton v Garnham [No 4] [2016] WASC 134 [44]: 'the case is not taken to have been dismissed for the want of prosecution pursuant to RSC O 4A r 28(1)'.
There was no irregularity or failure to comply with the rules by the court, or the other parties, not giving to the Liquidator notice of the case being on the inactive list and being dismissed for want of prosecution. Notice was given to the plaintiff by giving notice to its solicitors on the record and to its director who had been instructing the plaintiff's solicitors and who had appeared in court on behalf of the plaintiff when the matter was last in court on 20 November 2014.
The Liquidator says that he did not receive notice of the dismissal of the action for want of prosecution despite being on the court record as the liquidator. It appears that the Liquidator is referring to the fact that he was appointed as liquidator of the plaintiff company by order of this court on 2 June 2015 in COR 81 of 2015. The Liquidator had not been appointed at the time the court gave notice that the case had been put on the inactive cases list. The Principal Registrar gave notice that the case had been dismissed under O 4A r 28(3) to the plaintiff by giving notice to its solicitor on the record and the director who had been instructing its solicitors and who had appeared on its behalf in the last court hearing. The rules do not provide, and it is not practical, for the court to trawl through its records to see if they show whether a liquidator, administrator or controller has been appointed to a company before the Principal Registrar gives notice under O 4 r 28(3) that a case has been dismissed under subrule (1). The Liquidator's initial argument fails.
Premature notice of dismissal does not render dismissal irregular
In supplementary submissions the Liquidator says that it is a precondition to the case being taken to be dismissed for want of prosecution pursuant to O 4A r 28(1) that the case has been continuously on the inactive cases list for six months since the Principal Registrar gave notice that the case was on the inactive cases list. When the Principal Registrar informed the parties on 6 July 2015 that pursuant to O 4A r 28(1) the case was taken to have been dismissed for want of prosecution, six months had not expired since the Principal Registrar had given notice that the case had been put on the inactive cases list. Counsel for the Liquidator, Mr Watters, says that the Principal Registrar's letter is a failure to comply with the rules or is an irregularity which results in the case not being taken to be dismissed for want of prosecution pursuant to O 4 r 28(1). That argument is wrong for the following reasons.
The proper construction of O 4A r 28(1) together with O 4A r 25(1) is that a case that is on the inactive cases list for six continuous months after the Principal Registrar has given notice that the case is on the inactive cases list is taken to have been dismissed for want of prosecution: see Leighton v Garnham [No 4]; Timcal Pty Ltd v Sons of Gwalia Ltd (Subject to Deed of Company Arrangement) [No 2] [2011] WASC 58. The action is not dismissed by the Principal Registrar giving the parties notice that the case has been dismissed nor is the action dismissed by any administrative procedure of the court. The action is dismissed as a result of the operation of the rules. No order of the court is necessary to give effect to the deemed dismissal: Rowe v Stoltze [2013] WASCA 92 [31], [33] (Newnes JA, Pullin & Murphy JJA agreeing).
The action was not dismissed by the Principal Registrar's letter, it was taken to have been dismissed on the expiry of six months after the Principal Registrar had given notice that the case was on the inactive cases list. That is, by operation of the rules the action was taken to have been dismissed on 19 July 2015.
Mr Watters submitted that the Principal Registrar's letter of 6 July 2015 was a failure to comply with the requirements of the rules. The letter was sent before the case was dismissed, not upon or after the case is dismissed as required by O 4A r 28(3). RSC O 2 r 1(1) provides that a failure to comply with the requirements of the rules shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any documents, judgment or order therein. Rule 1(2) provides that the court may on the ground that there has been a failure to comply with the rules set aside either wholly or in part the proceedings in which the failure occurred, any step taken in those proceedings, or any document, judgment or order therein or exercise its powers under the rules to allow such amendments if any to be made and to make such order if any dealing with the proceedings generally as it thinks fit.
The failure to give notice in accordance with O 4A r 28(3) does not render the dismissal of the case irregular or liable to be set aside. The dismissal of the case is not irregular. The dismissal occurred by operation of the rules. The giving of notice under O 4A r 28(3) is not, and cannot, be a condition of the case being dismissed. It follows that the court does not have power pursuant to O 2 r 1(2) set aside the deemed dismissal of the case.
If, contrary to my finding, the court does have power pursuant to O 2 r 1(2) to set aside the dismissal of the case I would not exercise that power. The Liquidator was appointed on 2 June 2015. The Liquidator knew before 16 June 2015 that Rosebridge was involved in litigation, that Angove Law acted or had acted for Rosebridge and the Liquidator was 'dealing with' Mr Grego. In his affidavit of 26 August 2016 the Liquidator says that he met with Mr Grego on 7 July and that during that meeting Mr Grego provided legal documents relating to this action. However, the Liquidator does not disclose which documents. He does not say whether or not Mr Grego provided him with the letter of 19 January 2015 from the Principal Registrar informing the plaintiff that the case had been put on the inactive cases list. On 7 July the Liquidator received a letter from the first defendant's solicitors informing him that the action had been dismissed for want of prosecution.
The Liquidator did not take urgent steps to protect the plaintiff's position. The Liquidator wrote to the court on 13 July 2015 requesting a list of documents and orders made in the proceedings but did not attend the offices of Angove Law and collect the files until 11 September 2015. Although the Liquidator 'contacted' James Healy of Francis Burt Chambers for assistance on 10 July 2015 he did not engage a solicitor until September 2015. It cannot be inferred that if the Liquidator had not been informed on 7 July that the case had been dismissed he would have caused some action to be taken to have the case removed from the inactive cases list prior to 19 July 2015. To the contrary, the only available inference is that if he had not been informed on 7 July 2015 that the case had been dismissed the Liquidator would have done nothing to remove the case from the inactive cases list before 19 July.
It is not the Principal Registrar's letter of 6 July 2015 which caused the Liquidator not to take action to have the case removed from the list, it is that the Liquidator did not know that the action had been placed on the inactive cases list which caused him not to act. The Liquidator says:
If I had known that this action had been placed on the inactive cases list, or that it was at risk of being dismissed for want of prosecution if the plaintiff did not take a procedural step, I would have instructed solicitors on an urgent basis to make an application or apply for an extension as necessary to protect the plaintiff's ability to proceed with the case.
The Liquidator not knowing that the case has been put on the inactive case list was not the result of any non‑compliance with the rules or irregularity.
No inherent jurisdiction to reinstate case
Alternatively, the Liquidator submits that the court should set aside the dismissal of the case and reinstate it on the CMC list in the exercise of the court's inherent jurisdiction.
Judges and academics frequently distinguish between inherent jurisdiction, inherent powers and implied powers. It is not necessary to distinguish between those concepts for the purposes of this case. This court's inherent jurisdiction or inherent powers are not unlimited. Inherent jurisdiction is not palm tree justice. A judge does not have an unfettered right to do what is thought to be fair as between the parties.
Section 167(1)(a) of the Supreme Court Act 1935 (WA) empowers the judges of the Supreme Court to make Rules of Court for regulating the procedure and practice followed in the Supreme Court. RSC O 1 r 1(3A) provides that the inherent power of the court to control the conduct of a proceeding is not affected by the Rules of the Supreme Court. However, the court may not exercise its inherent or implied powers if to do so is inconsistent with a provision of a statute or rules of court. In Landsal Pty Ltd (in liq) v REI Building Society [1993] FCA 121; (1993) 41 FCR 421 (Landsal) the Full Court of the Federal Court (Keely, Burchett and Drummond JJ) held that in hearing the trial in two phases the trial judge was within the implied power of the court. Their Honours said at 427:
It is now beyond question that the Federal Court, like differently constituted superior courts, has all the powers that are necessary to ensure the proper administration of justice in the cases that come before it, including power to control the processes and proceedings of the court. Section 38 of the Federal Court of Australia Act does not deny the court power to control its procedures to ensure the proper administration of justice. Whether or not these are properly called inherent powers, in the sense referred to by Menzies J in R v Forbes; Ex parte Bevan (1972) 127 CLR 1 at 7, so far as the Federal Court is concerned, they are certainly powers to be found by implication in the Federal Court of Australia Act, the statute under which the court is established: see Jackson v Stirling Industries Ltd (1987) 162 CLR 612 at 616, 618, 619, 623‑4 and 640‑2; and Hamilton v Oades (1989) 166 CLR 486 at 516.
This court's implied power to regulate its own procedures in the administration of justice in a particular regard is not confined to a situation in which there is no statute or rule of court that could possibly apply to what is to be done in that regard. The true rule is that a court may exercise its inherent or implied powers in a particular case, even in respect of matters that are regulated by a provision of a statute or rules of court, so long as it can do so without contravening any such provision: see Taylor v Attorney-General [1975] 2 NZLR 675 at 680, 687‑8 and 692‑3; cf Wentworth v NSW Bar Association (1992) 176 CLR 239 at 252 ‑ 254.
Landsal was cited with approval by the Court of Appeal in Centurion Trust Company Ltd v Director of Public Prosecutions (WA) [2009] WASCA 97 where the Court of Appeal held that the Supreme Court does not have jurisdiction to grant an extension of time to file an objection under s 79 of the Criminal Property Confiscation Act 2000 (WA). Buss JA said:
In my opinion, the court does not have inherent jurisdiction to grant an extension of time to permit a person to file an objection under s 79 after the property, the subject of a freezing order, has been confiscated.
The court cannot resort to its inherent jurisdiction to override the statutory scheme for the confiscation of property under s 7 or the statutory scheme for circumscribing the time within which an objection may be filed or the circumstances in which the court may grant an extension of time. See Reid v Howard [1995] HCA 40; (1995) 184 CLR 1, 16 - 17; DJL v The Central Authority [2000] HCA 17; (2000) 201 CLR 226 [25] ff. The court may, of course, exercise its inherent jurisdiction in respect of matters regulated by a statute or the rules of court, but only if this can be done without contravening the statute or rules. See Landsal Pty Ltd (in liq) v REI Building Society, now The Co-operative Building Society of South Australia (1993) 41 FCR 421, 427 - 428; Re Hoffman [2004] WASCA 238; (2004) 187 FLR 263 [23] - [24].
In the present case, if the court were to grant an extension of time in its inherent jurisdiction, it would be acting in disregard of the statutory limitations upon the exercise of the power in s 79 to allow further time, and would be circumventing the scheme of the legislation by enabling a person in the position of the appellant to, in substance, challenge the confiscation of property without satisfying the requirements of s 87. The court's inherent jurisdiction is not available in these circumstances [180] ‑ [182].
In Al‑Rawi v Security Service [2011] UKSC 34; [2012] 1 AC 531 the United Kingdom Supreme Court held that the court had no common law power to adopt a closed material procedure in an ordinary civil claim for damages. Lord Dyson said:
A distinction should be made at the outset between the court (i) exercising its inherent power to control its own procedure and (ii) exercising its general power to develop the substantive common law incrementally. We are not here concerned with (ii), a paradigm example of which would be the incremental development by the courts of the law of negligence. We are concerned with (i). In his seminal article 'The Inherent Jurisdiction of the Court' (1970) CLP 23, Sir Jack Jacob said at p 24: 'the source of the inherent jurisdiction of the court is derived from its nature as a court of law, so that the limits of such jurisdiction are not easy to define, and indeed appear to elude definition.' But there is no doubt that the court's inherent power to regulate its own procedures is not unlimited. For example, the power may not be exercised in contravention of legislation or rules of court. In the words of Sir Jack Jacob, at p 24: 'the court may exercise its inherent jurisdiction even in respect of matters which are regulated by statute or by rule of court, so long as it can do so without contravening any statutory provision.' In such a case, its power has been removed by statute and cannot be exercised [18].
In Rowe v Stoltze the Court of Appeal considered an appeal against a decision of Commissioner Gething in the District Court refusing the appellant's application to reinstate a case which is taken to have been dismissed under r 44G(1) of the District Court Rules 2005 (WA). Rules 44G(1) and (2) are in the same terms as RSC O 4A r 28(1) and (3). In that case the District Court issued a notice stating that the action had been placed on the inactive cases list. The notice was received by the appellants' solicitors but did not come to the attention of the solicitor with the conduct of the matter. Six months later, the action having been on the inactive cases list for six continuous months, was taken to be dismissed for want of prosecution. The appellants applied for the action to be reinstated. Amongst other grounds the appellants sought to rely on the incidental or implied powers of the District Court. Newnes JA, with whom Pullin and Murphy JJA agreed, observed that the District Court has no inherent jurisdiction but it does have such powers as are reasonably incidental to the exercise of its statutory jurisdiction. In response to the appellants' submissions that under its incidental or implied powers the District Court could extend the time for the appellants to comply with r 44G(1) so as to permit an application under r 44F(2) to remove the case from the inactive cases list, his Honour said:
That submission is misconceived. The appellants are not required to 'comply' with r 44G(1). That rule simply has effect when a case has been on the Inactive Cases List for a period of six continuous months. Nor is the action dismissed by an administrative procedure but as a result of the operation of rules of court. What, in effect, the appellants seek under this ground is an extension of the six-month period stipulated in r 44G(1) to enable them to bring an application to remove the case from the Inactive Cases List.
The District Court has no power to grant such an extension. There is no express power to do so and to do so would clearly not fall within the court's implied or incidental powers. The court may order that a case is not deemed to be inactive if no document is filed for 12 months: r 44A. It may also order that the case be taken off the Inactive Cases List if it is satisfied that good reason exists to do so: r 44F(3). But it cannot, by reliance on implied or incidental powers or otherwise, by order alter the operation of r 44G(1). Such an order would conflict with the terms of the rule. It is clear that a court cannot exercise its inherent or implied powers in a manner which would conflict with a provision of a statute or the rules of court: Landsal Pty Ltd (in liq) v REI Building Society (1993) 41 FCR 421; (1993) 113 ALR 643, 650.
I should mention that it was not submitted, as it was submitted below, that as there was no perfected order of the court dismissing the action, the deemed dismissal of the action under r 44G(1) could be set aside at any time. Any such contention would be without merit. No order of the court is necessary to give effect to the deemed dismissal [31] - [33].
The Liquidator's application to reinstate the action on the CMC list must be dismissed.
Additional security should not be released to the plaintiff
The Liquidator seeks an order that the additional sum of $180,000 paid into court pursuant to the order made on 24 September 2009 be returned to the Liquidator. It appears that the basis for that application is that the order I made on 24 September 2009 for the plaintiff to provide additional security conflicts with the order made by Master Sanderson on 23 February 2004 that the defendants have leave to apply following entry of the action for trial and on seven days' notice to increase the amount of security. The plaintiff made payments into court on 6 November 2009 and 1 June 2010 as further security for costs pursuant to orders I made on 24 September 2009 as varied by further orders made on 4 November 2009. The plaintiff made a further payment into court on 15 September 2014 pursuant to an order I made on 18 June 2014.
The Liquidator says that the orders I made, and in particular the order of 24 September 2009 is contrary to the order made by the Master because the Master's order gave leave to apply for further security only after the matter had been entered for trial. The Liquidator says that applying the principle of judicial comity there appears to be no reason why the earlier order of Master Sanderson should be set aside or supplanted by the later order made by me.
A judge may vary an interlocutory order made by another judge, see for example Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 [23] ‑ [24], [70]; Commonwealth Bank of Australia Ltd v Saraceni [2013] WASC 115 [9]. In any event, an order has effect unless and until it is set aside on appeal. Any supposed conflict between the order made by Master Sanderson on 23 February 2004 and the order I made on 24 September 2009 provides no basis for ordering that the security paid into court be released to the plaintiff.
Security held should not be released to the plaintiff
The Liquidator says that the money currently held by the court as security for the defendants' costs should be released to the Liquidator. The Liquidator says that this issue gives rise to the question who owns the funds held in court, are they an asset of the company that should be distributed to the company's creditors according to priority and otherwise rateably or are they an asset to which the defendants are entitled? I will deal with this submission when considering the application of the defendants that the money paid into court as security for their costs be paid out to the defendants.
Defendant's applications for costs and payment out
The defendants seek orders for their costs of the proceedings and for payment of those costs out of the money paid into court by the plaintiff as security for the defendants' costs. Before considering those applications, a threshold question arises: having regard to the terms of s 471B of the Corporations Act 2001 (Cth), can the applications for costs orders and payment out be brought without leave of the court?
Leave to proceed is not required
Section 471B of the Corporations Act restricts a person from beginning or proceeding with a proceeding in court where a company is being wound up in insolvency except with leave of the court. The defendants submit that leave of the court is not required to proceed with their applications for costs orders but alternatively if leave is required they apply for leave.
In BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339 Anderson J, with whom Kennedy and Ipp JJ agreed, said:
In my opinion, an application for security for costs is not a proceeding in a court against the company within the meaning of s471B. We were not referred to any authority directly in point but in my view the section is concerned with proceedings initiated against the company, not with procedural applications by defendants in an action initiated by the company. If it was intended that the section should operate to cut down the defensive procedural measures that would otherwise be available to a defendant in an action brought by the company, thereby reducing the defendant's normal rights in the litigation whilst leaving the company's rights intact, much clearer language would have been used in the legislation.
In my view the defendants' applications for costs and payment out are not proceedings against the plaintiff within the meaning of s 471B of the Corporations Act and leave is not required. I think this follows from the approach to the section indicated by Anderson J in BPM Pty Ltd v HPM Pty Ltd. If I am wrong in that conclusion, I would have granted leave so that the applications could be considered on their merits.
Plaintiff should pay defendants' costs
The first defendant (Commonwealth Bank) and third defendant (WFB) seek orders that the plaintiff pay their costs of the action fixed in the sum of $141,092.50 and $169,083.18 respectively. The second defendant (Corrs) seeks an order that the plaintiff pay its costs of the action, including the costs of the contribution proceedings instituted by the Commonwealth Bank and WFB against them fixed in the sum of $152,255.04. The explanation for the defendants seeking costs in those sums is as follows. The plaintiff paid various amounts into court pursuant to orders that it pay amounts into court as security for the defendants' costs. Some amounts have been paid out to the defendants to satisfy earlier costs orders in their favour. The amount of costs sought by each defendant is the remaining amount of security for costs paid into court by the plaintiff on account of each defendant.
RSC O 4A r 28(4) provides that notwithstanding a case is dismissed under r 28(1) any party to the case may apply for an order for costs and the court may make an order as to costs. The court has power to fix the amount of costs where taxation of costs is not ordered ‑ RSC O 66 r 51.
Each of the defendants say that as the successful party they are entitled to their costs of the proceedings as there are no circumstances warranting departure from the usual rule. I accept those submissions.
Corrs seeks an order that its costs be fixed in the amount of the remaining security for costs paid into court for it, that is $152,255. Corrs relies upon the affidavits of Deborah Renee de Blank affirmed 2 June 2016 and Shonelle Duffy sworn 18 July 2016. Attached to Ms de Blank's affidavit is a draft bill of costs. Ms de Blank prepared the draft bill in the manner set out in [4] and [5] of her affidavit. Ms de Blank affirms that on the basis of the draft bill she estimates that Corrs costs of defending this action without any special costs orders having been made would be taxed well in excess of $152,255. In her affidavit Ms Duffy sets out the legal costs that have been paid by Law Mutual on behalf of Corrs. Ms Duffy deposes that the total costs incurred by Law Mutual and its underwriters in the action to 13 November 2015 is approximately $1,232,934. It is appropriate to order that the plaintiff pay Corrs' costs of the action fixed in the sum of $152,255.04. I am satisfied that if the matter were to proceed to a taxation Corrs' costs would be taxed in an amount greater than that. No purpose is served by requiring the costs to be taxed.
The Commonwealth Bank seeks an order that its costs be fixed in the sum of $141,092.50. That is the remaining amount of the amounts paid into court by the plaintiff on account of the bank. In support of its claim for costs to be fixed in that sum the Commonwealth Bank relies upon an affidavit of Ms McNally sworn 7 July 2016. Attached to Ms McNally's affidavit is a draft bill of costs prepared by her. The draft bill is in the amount of $226,110. Ms McNally deposes that since 24 June 2008 the amount incurred by the Commonwealth Bank in legal costs is at least $1,081,322 including at least $310,007.52 of disbursements such as counsel fees, expert fees and filing fees. It is appropriate to order that the plaintiff pay the Commonwealth Bank's costs of the action fixed in the sum of $141,092.50. I am satisfied that if the Bank's costs were taxed the costs would be allowed in a sum in excess of $141,092. No purpose is served by ordering a taxation of costs.
WFB seeks an order that its costs be fixed in the sum of $169,083.18. WFB relies upon an affidavit of Anthony David Bereyne sworn 21 July 2016. Mr Bereyne attaches an extract from the third defendant's solicitor's accounting system which records that up to and including 30 June 2015 the third defendant had incurred costs in the action of $843,268 and disbursements of $111,690, that is a total of $955,958 excluding GST. Mr Bereyne attaches a draft bill of costs prepared under his direction in the sum of $237,213. Mr Bereyne sets out the basis on which he has prepared the draft bill in [27] and [28] of his affidavit. Mr Bereyne says that the draft bill was prepared having regard to the scale limits. The bill well exceeds the remaining security for costs paid into court on account of the third defendant. It is appropriate that the amount of the third defendant's costs be fixed in the sum of $169,083.18. I am satisfied that if the matter were to proceed to a taxation WFB's costs would be taxed in an amount greater than that. No purpose is served by requiring the costs to be taxed.
Payment out
Each of the defendants seeks an order that in satisfaction of the costs to be paid to it by the plaintiff, the costs be paid to it from the security paid into court by the plaintiff on 6 November 2009, 1 June 2010 and 12 September 2014.
I have referred earlier to the issue raised by the Liquidator whether the funds paid into court by the plaintiff belong to the plaintiff and should be distributed to its creditors in the course of its winding up. Payments made by the company after it became insolvent to one of its creditors by way of unfair preference (defined in s 588FA of the Corporations Act) within a prescribed period might be recoverable by the Liquidator under Corporations Act s 588FF. Each of the defendants submits that it has an interest as equitable chargee in the monies paid into court by way of security for costs and that upon the making of a final costs order in its favour it is entitled to payment of monies out of court in accordance with RSC O 25 r 7. Order 25 r 7 provides that where money has been paid into court as security for costs and the action has been finally disposed of, the amount of the security shall be paid out to the party for whose security it was furnished to the extent pro tanto that costs are due from the securer to such party, and the Principal Registrar shall pay out the security accordingly unless the court has otherwise ordered, and the balance (if any) shall be refunded to the securer without the necessity for any special order. Thus, the money paid into court by the plaintiff is to be paid out to the defendants pro tanto that costs are due from the plaintiff to each of the defendants unless the court otherwise orders. The Liquidator's submission appears to be to the effect that the court should order the money to be paid out to the Liquidator because payment to the defendants would be an unfair preference.
The issue was considered by Allanson J in Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [No 4] [2014] WASC 405. After outlining the issue and the relevant provisions of the Corporations Act and reviewing relevant authorities his Honour concluded:
It seems to be settled that the party paying money into court appropriates that money to meet the other party's claim, if that claim is made good. The party paying in gives security in the form of a charge over that money in favour of the other party: see MSPR Pty Ltd v Advanced Braking Technology Ltd (No 2) [2014] NSWCA 283 [10]; Gunns Limited v Tasmanian Conservation Trust Inc [2012] TASSC 51 [28]; Equuscorp Pty Ltd v Wilmoth, Field Warne (a firm) [2006] VSCA 123 [22]; Dwight v Commissioner of Taxation [1992] FCA 178; (1992) 37 FCR 178.
The result, in my opinion, is that on the entry of judgment in January 2013, at the latest, the money in court was charged in favour of the defendants. Technomin had an interest that the money should be held and paid out only in accordance with the orders made by the court. But it had no right to the money itself, and could not call for it to be paid to it or at its direction. I doubt that, in those circumstances, the money could be regarded as the property of the company so that payment out would be a transfer or other disposition of its property, or would be a payment made by it.
I need not go into the other questions which arise from the definition of unfair preference in s 588FA of the Corporations Act and the extent to which the defendants were secured creditors. I am concerned only to determine where the interests of justice now lie. I am not satisfied that Technomin's case that it retains an interest in the money is sufficiently strong to justify an order that the money not be paid out in accordance with the orders in favour of the defendants.
I also take into account that should Technomin go into liquidation and the liquidator claim the payment is an unfair preference, there is no reason to believe that an order that the money held as security be paid to the defendants would prejudice proceedings that might be brought by a liquidator under s 588FF of the Corporations Act.
In the circumstances, I will order the payment out of court to the defendants of the sums held as security for costs [23] ‑ [27].
With respect, I adopt his Honour's analysis and follow his Honour's decision. The result is that on the making of the order that the plaintiff pay each of the defendant's costs fixed in the sums specified, at the latest, the money in court is charged in favour of each of the defendants. The plaintiff has an interest that the money should be held and paid out in accordance with the orders made by the court but it has no right to the money itself and cannot call for it to be paid to or at its direction. There is no good reason to order that the moneys paid into court by the plaintiff should not be paid out to the defendants for whose security it was furnished. The money paid into court by the plaintiff as security for the defendants' costs should be paid out of court to satisfy the costs order in favour of each of the defendants.
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