Snowside Pty Ltd as trustee for the Snowside Trust v Boart Longyear Ltd

[2018] NSWCA 75

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Snowside Pty Ltd as trustee for the Snowside Trust v Boart Longyear Ltd [2018] NSWCA 75
Hearing dates:	10 April 2018
Decision date:	10 April 2018
Before:	Basten JA, Leeming JA
Decision:	1.   Dismiss the application for leave to appeal from the judgment of Black J of 13 September 2017.  2.   Order that the applicants pay the respondents’ costs of the application.
Catchwords:	APPEALS – leave to appeal – costs – primary judge made partial costs order in favour of applicants who were granted leave to be heard in opposition to creditors’ schemes – whether discretion of primary judge miscarried – first proposed ground of appeal not raised before primary judge – second proposed ground would give rise to complex questions of apportionment and need for further hearing – no question of principle or public importance or demonstrated injustice – leave refused
Legislation Cited:	Supreme Court (Corporations) Rules 1999 (NSW), r 2.13
Cases Cited:	In the matter of Boart Longyear Ltd (No 3) [2017] NSWSC 1227 In the matter of Boart Longyear Ltd (No 4) [2017] NSWSC 1357 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar (2008) 237 CLR 66; [2008] HCA 42 Park Trent Properties Group Pty Ltd v Australian Securities and Investments Commission [2016] NSWCA 298; 116 ACSR 473 Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) 48 ACSR 681
Category:	Principal judgment
Parties:	Snowside Pty Ltd as trustee for the Snowside Trust (First Applicant) Maurici Nominees Pty Ltd as trustee for AP Maurici & Associates Pty Ltd (Second Applicant) Boart Longyear Ltd (First Respondent) Boart Longyear Management Pty Ltd (Second Respondent) Boart Longyear Australia Pty Ltd (Third Respondent) Votraint No. 1609 Pty Ltd (Fourth Respondent)
Representation:	Counsel: P Reynolds (Applicants) M Izzo and B Ng (Respondents)   Solicitors: Speed and Stracey Lawyers (Applicants) Ashurst Australia (Respondents)
File Number(s):	2017/00306538
Decision under appeal	Court or tribunal: Supreme Court Jurisdiction: Equity – Corporations List Citation: [2017] NSWSC 1227 Date of Decision: 13 September 2017 Before: Black J File Number(s): 2017/122411

Judgment

1. JUDGMENT of THE COURT delivered by LEEMING JA: This application for leave to appeal relates to part of the costs incurred by the applicants, who were shareholders of the respondent and potential creditors if they were successful in pending oppression proceedings, in opposing two interdependent creditors’ schemes of arrangement.

2. Following an exchange of written submissions, the primary judge determined the question of costs on the papers: In the matter of Boart Longyear Ltd (No 3) [2017] NSWSC 1227. Favourably to the applicants, his Honour ordered that they be paid their costs of attending the hearings on 4-5, 13-14 and 27 July 2017 as well as the costs of preparing for and attendance at the hearings of 9 and 14 August 2017. Adversely to the applicants, the primary judge declined to order that they have their costs for preparing for the July hearings, a significant (indeed, probably the most significant) component of which was the obtaining of a suite of expert reports.

3. The applicants were not parties, nor were they bound by the proposed schemes, but were permitted to be heard in the scheme proceedings under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW). The procedural history was described by the primary judge at [2]-[3]:

“By way of background, the Plaintiffs, BLY and several associated companies, initially sought orders approving two interdependent schemes of arrangement between the Plaintiffs and their secured and unsecured creditors. In my judgment in respect of the first hearing ([2017] NSWSC 567), I ordered that the scheme meetings be convened and the Court of Appeal dismissed an appeal from that judgment on 26 May 2017 ([2017] NSWCA 116). The two creditors’ schemes were then approved by the requisite majorities at the scheme meetings. The Plaintiffs subsequently sought approval of the schemes in their original form at a hearing on 4–5 and 13–14 July 2017. A secured creditor, First Pacific Advisers LLC (‘First Pacific’), and the Snowside companies opposed the application for approval of the schemes in their original form at the hearing on those days.

The proceedings were then adjourned to 27 July 2017 to allow satisfaction of a significant condition precedent in respect of the schemes and, in the interim, I ordered a mediation between the Plaintiffs and those entities that had appeared in the proceedings, both to support and oppose the schemes. Following the mediation, BLY, First Pacific and several other secured creditors of BLY reached agreement as to the terms of altered schemes and an application for approval of the schemes in altered form was heard on 9 and 14 August 2017. The Snowside companies continued to oppose the schemes in their altered form at the further hearings on those dates. I approved the schemes in their altered form by my judgment delivered on 22 August 2017 ([2017] NSWSC 1105) (‘Second Judgment’) and the Court of Appeal dismissed an appeal brought by the Snowside companies (by leave) from the Second Judgment by its judgment delivered on 29 August 2017 ([2017] NSWCA 215).”

4. The primary judge carefully summarised the background and the competing submissions on the exercise of the costs discretion. Dispositively of the question of the costs of preparation were his Honour’s reasons at [25]-[28]:

“As I noted above, there was a substantial degree of overlap at the hearings on 4–5 and 13–14 July 2017 between the position adopted by First Pacific, which then opposed the schemes in their original form, and that of the Snowside companies. The position likely to be adopted by First Pacific was clear from its Statement of Particulars as to why the Court should refuse to approve the schemes of arrangement, filed on 15 June 2017, although it was always possible that First Pacific would change its position as it later did in respect of the altered schemes. First Pacific led expert valuation evidence to oppose approval of the schemes in their original form and made comprehensive submissions in opposition to the schemes in that form on 4–5 and 13–14 July 2017. Those submissions addressed all relevant issues of valuation of BLY, and I observed in the Second Judgment (at [90]) that:

“I note, for completeness, that the agreement reached between the Plaintiffs and secured and unsecured creditors also provides for BLY to reimburse First Pacific for its reasonable documented out-of-pocket fees and expenses incurred in connection with the schemes and related proceedings, up to an aggregate amount not exceeding US$3 million, although this does not require an alteration of the schemes. In the ordinary course, it is likely that First Pacific would have recovered its costs of these proceedings, so far as it is plain that the objections it raised to the schemes in their original form were, at least, strongly arguable.

It seems to me that, on 4–5 and 13–14 July 2017, the Snowside companies’ objections to the original schemes were largely parallel to, and in part derivative of, First Pacific’s objections to the schemes. It also seems to me that the extent of evidence led by the Snowside companies, including the several expert reports of Mr Hall and Mr Samuel, was too great to fairly require the Plaintiffs to pay the costs of those reports, in circumstances that First Pacific was already leading expert evidence in opposition to the schemes and its and the Snowside companies’ reports covered substantially (although not entirely) similar territory. So far as that expert evidence addressed the interests of the Snowside companies as shareholders, it largely paralleled (although extending) First Pacific’s expert evidence and case, and it was not necessary to the position put by the Snowside companies as claimants in other proceedings against BLY. I am not persuaded that, applying either the principles generally applicable to the costs of a party that is heard under r 2.13 of the Supreme Court (Corporations) Rules or the possibly more generous approach that has been adopted where a person who will be bound by a scheme or a reduction of capital opposes that scheme or reduction of capital, the Plaintiffs can fairly be ordered to pay the Snowside companies’ costs of preparing several expert reports that overlapped with aspects of the expert evidence led by First Pacific.

I do not doubt that, had I been persuaded that the expert evidence on which the Snowside companies relied should be accepted in preference to KordaMentha’s and KPMG’s reports on which the Plaintiffs relied, that would have advanced the Snowside companies’ positions as shareholders and claimants in the oppression proceedings and opponents to the schemes, but that does not seem to be sufficient basis to require the Plaintiffs to pay the substantial costs that would be referable to those reports. I also accept that it may well be strategically advantageous to a person or many persons who is or are affected by a scheme in an economic sense, although not bound by it, to run a case in opposition to the scheme in parallel to that of a person bound by the scheme who opposes it, including against the contingency (which occurred here) that the scheme is altered to address the concerns of the person bound by it who previously opposed it. However, it does not follow that the scheme proponent should be required to fund that course, for one or many such persons not bound by the schemes, under the principles to which I have referred above.

I therefore do not consider the Snowside companies should have their costs of that expert evidence or of steps prior to the hearing commencing on 4–5 and 13–14 July 2017 which would largely have related to the preparation of that evidence and of submissions about it. It seems to me preferable to take that approach rather than to seek to segregate the smaller part of preparation costs that would not have related to that evidence, which would likely give rise to significant complexities, delay and costs in an assessment.”

5. There are two proposed grounds of appeal. The first is that there was error in basing the decision on a finding of a substantial overlap between the applicants’ expert evidence and that of First Pacific LLC, without considering whether the applicants knew or should have known that there was such overlap. This ground resembles the basis upon which the applicants applied to reopen the earlier judgment, which application was refused: In the matter of Boart Longyear Ltd (No 4) [2017] NSWSC 1357. The dispositive paragraphs are [26]-[28]:

“I do not accept the Snowside companies’ submission that the findings that I reached in the Judgment turned on any relevant misapprehension. The finding in Judgment [26], which I quoted in paragraph 9 above, involved observations as to the character of the Snowside companies’ objections to the schemes and their relationship with First Pacific’s objections to the schemes, as put at the second hearing of the schemes; the extent of the expert evidence led by the Snowside companies (although I had previously noted that I gave lesser weight to a mere counting of the number of Mr Hall’s reports); the fact that First Pacific was already leading expert evidence in opposition to the schemes; and the fact that the Snowside companies’ expert evidence covered substantially (although not entirely) similar territory to the expert evidence on which First Pacific relied. Each of those observations relates to objective matters and none of them depended upon any suggestion that the Snowside companies could have or should have taken steps to avoid that position.

Those observations do not involve any understanding or misunderstanding as to any question of subjective fault as to whether the Snowside companies either had, or did not have, or should have had, access to Mr Lonergan’s report or whether the overlap of expert reports was avoidable or not avoidable by the Snowside companies (or, for completeness, First Pacific or the Plaintiffs) or their respective representatives. I did not address or reach any finding as to that matter, or proceed under any misapprehension about it, because neither the Plaintiffs nor the Snowside companies had led evidence as to that matter or made submissions about it in respect of the question of costs. To the extent that I had assumed that the Snowside companies had access to First Pacific’s statement of particulars, there is no evidence that that assumption was incorrect. Those particulars were filed on 15 June 2017 and Mr Giles’ evidence is that his partner had inspected the Court file on 23 June 2017 and does not now recall whether he saw that statement of particulars when he did so.

My conclusion as to costs reflected an assessment of what fairness as between the Plaintiffs and the Snowside companies required in the relevant circumstances, recognising that the Snowside companies and First Pacific were each heard in the proceedings under r 2.13 of the Supreme Court (Corporations) Rules and were not parties to the proceedings; First Pacific was a party bound by one of the schemes, the secured creditors’ scheme, to which it took objection, and the Snowside companies had a more distant connection, as shareholders and possibly subordinated claimants in respect of oppression proceedings that they had only recently commenced against BLY; and there was, objectively, a significant overlap between the evidence led by First Pacific and the evidence led by the Snowside companies. The consequence of that overlap might well have been that neither First Pacific nor the Snowside companies could obtain an order from the Court, over the Plaintiffs’ opposition, for payment of the costs of the overlapping expert reports on which they relied, notwithstanding that their respective reliance on those reports may have been sensible and in their own interests, or necessary in their particular circumstances. That question was only determined in respect of the Snowside companies in the Judgment because the Plaintiffs and First Pacific had previously reached agreement as to the question of costs as part of a wider resolution of their differences in respect of the schemes.”

6. It has not been submitted that any of that reasoning is inaccurate. It follows that this is not a proposed ground of appeal which warrants a grant of leave. It is not disputed that the point now sought to be raised was not a matter which had been raised before the primary judge at first instance. The challenge is to the exercise of discretion as to costs. The applicants need to establish House v The King error. When a court has been asked to exercise a discretion, it will ordinarily be incumbent on a party contending on appeal that the discretion miscarried to demonstrate that the judge’s attention was drawn to the particular matter of which complaint was made: Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar (2008) 237 CLR 66; [2008] HCA 42 at [120]; Park Trent Properties Group Pty Ltd v Australian Securities and Investments Commission [2016] NSWCA 298; 116 ACSR 473 at [51] and [56] (coincidentally, the latter decision also involved a challenge to a costs discretion). No basis for a grant of leave has been made out.

7. The second proposed ground of appeal is that the Court erred in excluding the applicants’ preparation costs, rather than excluding the portion of preparation costs relating to the overlapping expert evidence. What the applicants seek is an order for their actual costs of preparation, less the costs of obtaining the expert reports, or alternatively, less a percentage reflecting the proportion of the preparation costs relating to the overlapping portions of the expert reports.

8. The starting point is that, as the primary judge noted, there is no presumptive entitlement to costs: Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) 48 ACSR 681 at [20]. That is an aspect of a grant of leave under r 2.13, with a concomitantly limited exposure to an adverse costs order.

9. Secondly, the unchallenged finding of the primary judge is that the steps taken by the applicants prior to hearing “would largely have related to the preparation of [the expert evidence] and of submissions about it”.

10. Thirdly, it is well settled that a broad-brush approach should be taken to questions of costs. That approach was taken by the primary judge, who considered making orders which delineated the different categories of costs more precisely, but declined to do so on the basis that it might “likely give rise to significant complexities, delays and costs in an assessment”. Indeed, the draft notice of appeal in this Court contemplates a remittal to determine the percentage of the overlap between the reports that were supplied.

11. There being no question of principle, or of public importance, and the subject matter being costs, the onus lies on the applicants to make out a clear case of injustice. No such case has been made out.

12. The application for leave to appeal should be dismissed, with costs.

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Decision last updated: 11 April 2018