FEDERAL COURT OF AUSTRALIA
Sands Contracting Pty Ltd v Cant (costs) [2021] FCA 751
File number: WAD 58 of 2021 Judgment of: MCKERRACHER J Date of judgment: 2 July 2021 Catchwords: COSTS – successful appeal of liquidators’ adjudication of creditor’s proof of debt – where liquidators are no longer appointed to the company in liquidation and did not contest the appeal – where new evidence adduced was decisive of the appeal Cases cited: Brodyn Pty Ltd v Dasein Constructions Pty Ltd (No 2) [2005] NSWSC 302
Capocchiano v Young [2013] NSWSC 879
Handberg, in the matter of Greight Pty Ltd (in liq) [2006] FCA 17
Sands Contracting Pty Ltd v Foodcorp (VIC) Pty Ltd [2020] FCA 1274
Sands Contracting Pty Ltd v Foodcorp (VIC) Pty Ltd (No 2) [2020] FCA 1415
Sands Contracting Pty Ltd v Cant [2021] FCA 638
Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; (1990) 169 CLR 332
Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 18 Date of last submissions: 18 June 2021 (Plaintiffs)
25 June 2021 (Defendants)Date of hearing: Determined on the papers Counsel for the Plaintiffs: Mr A Metaxas Solicitor for the Plaintiffs: Metaxas Legal Counsel for the Defendants: Ms D McCredden Solicitor for the Defendants: White Cleland Pty Ltd ORDERS
WAD 58 of 2021 BETWEEN: SANDS CONTRACTING PTY LTD (ACN 008 711 564), SANDS HOLDINGS PTY LTD (ACN 008 694 915), HECSANDS PTY LTD (ACN 008 748 650), ANTHONY JEROME SANDS, CARMEL JEAN SANDS, KEVIN JOHN SANDS AND LYNNE MARGARET SANDS (IN HER CAPACITY AS EXECUTOR OF THE ESTATE OF THE LATE PETER JAMES SANDS)
Plaintiffs
AND: ANTHONY ROBERT CANT AND RENEE SARAH DI CARLO
Defendants
ORDER MADE BY:
MCKERRACHER J
DATE OF ORDER:
2 JULY 2021
THE COURT ORDERS THAT:
1.The Plaintiffs’ costs of the proceedings be paid out of the property (if any) of Foodcorp (VIC) Pty Ltd (ACN 074 563 385) (in liquidation).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MCKERRACHER J:
BACKGROUND
In Sands Contracting Pty Ltd vCant[2021] FCA 638, I allowed an appeal from an adjudication of a proof of debt conducted by the defendants (the Liquidators). As noted in that decision, the Liquidators were in fact removed by consent from their appointment shortly after the plaintiffs’ (Sands’) appeal proceedings were commenced and a submitting notice was filed for the Liquidators. I invited the parties to make submissions on costs, a topic on which the Liquidators reserved the right to be heard. The submissions from Sands were brief and to this effect:
1. The appeal was allowed and [Sands] obtained the relief claimed.
2. Costs usually follow the event.
3. [Sands] contend that there is no reason to depart from the usual rule.
4.The appeal was commenced as a consequence of the [Liquidators] making numerous errors in the adjudication. Had the [Liquidators] not…
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- Case
- [2021] FCA 751
- Decision Date
CaseChat Overview and Summary
The court considered that allowing the liquidators to avoid costs would undermine the principle that if an appeal is successful, the appellant should be compensated for costs unless there is a finding of wrongdoing. The liquidators acted in a quasi-judicial capacity and there were no findings of wrongdoing against them. However, the decisiveness of the new evidence and the liquidators' lack of contest meant that costs should be awarded against the liquidators. The court ordered that the liquidators be indemnified from the assets of the company. This decision aligns with the principle that if an appeal is successful, the appellant should be compensated for costs, unless there is a finding of wrongdoing against the respondent.
The court ordered that the plaintiffs' costs of the proceedings be paid out of the property (if any) of Foodcorp (VIC) Pty Ltd. This ensures that the successful appellant is compensated for the costs incurred in the appeal. The liquidators are to be indemnified from the assets of the company, which maintains the principle that successful appeals should be compensated unless there is a finding of wrongdoing.
Orders
Orders of the court
1. The Plaintiffs’ costs of the proceedings be paid out of the property (if any) of Foodcorp (VIC) Pty Ltd (ACN 074 563 385) (in liquidation).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
The Liquidators oppose this claim for costs and contend instead that there should be no order as to costs.CONSIDERATION The Liquidators were formerly the liquidators of Foodcorp (VIC) Pty Ltd (ACN 074 563 385) (the Company). In separate proceedings commenced prior to the appeal proceedings, Sands sought the removal of the Liquidators. In the course of my reasons for judgment in Sands Contracting Pty Ltd v Foodcorp (VIC) Pty Ltd [2020] FCA 1274 (Sands (No 1)), in which the application for removal was refused, I stated that the Liquidators should take all reasonable steps to assess Sands’ proof of debt. In Sands Contracting Pty Ltd v Foodcorp (VIC) Pty Ltd (No 2)[2020] FCA 1415, I ordered that the Liquidators should report to the Court within 21 days of completing an adjudication of the proofs of debt lodged by creditors in the liquidation of the Company. The Liquidators conducted an adjudication of the proofs and reported to the Court as required. On 15 March 2021, Sands commenced the present proceeding, comprising an appeal against the Liquidators’ adjudication of their proof of debt. On 23 March 2021, the Liquidators consented to orders that they be removed as liquidators of the Company. The Liquidators elected to take no part in the conduct of this proceeding. Contrary to Sands’ submissions, there was no criticism of the Liquidators in Sands v Cant, let alone findings of ‘numerous errors’. Indeed, an important element of Sands’ appeal was its ability to adduce new evidence which was, in significant respects, decisive of its success as was made clear (at [34] and [36]):34 I am satisfied that there is adequate proof to support the fact that the amount claimed by Sands is due in full. Although the Company raised challenges, I am satisfied that those challenges are adequately addressed by the additional evidence produced by Sands. …36 … the decision I am required to make on the plaintiffs’ present application to set aside that decision is to be, in effect, a hearing de novo in which the appellant is required to prove its case. I now have additional evidence and argument available to me which, in my view, casts real doubt on two of the key premises adopted by the Liquidators to reach the relevant compromise. In saying that I do not intend to be critical of the Liquidators who I consider carried out their task appropriately in the circumstances. The Liquidators submit, and I accept, that an appeal of an adjudication of a proof of debt is an unusual proceeding by nature. The determination being appealed concerned a decision made by the Liquidators in their capacity as liquidators of a company, rather than in their personal capacity or from which they would derive any benefit. As observed by the High Court in Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; (1990) 169 CLR 332 (at 338-339), in the adjudication of a proof of debt, a liquidator acts in a quasi-judicial capacity and reflects a liquidator’s performance of his or her duty to distribute the assets of the company to those truly entitled to a distribution. If the Court on an appeal of an adjudication of proof allows the appeal in part or in full where there is no finding of wrongdoing on the part of the liquidator, then the Court may order costs against the liquidator together with an order that the liquidator is to be indemnified for those costs from the assets of the company: Brodyn Pty Ltd v Dasein Constructions Pty Ltd (No 2) [2005] NSWSC 302.