Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63
Citation:
Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63
Appeal from:
Bluechip Development Corporation (Gladstone) Pty Ltd v Sunstruct Pty Ltd & Ors [2013] FCCA 141
Bluechip Development Corporation (Gladstone) Pty Ltd v Sunstruct Pty Ltd & Ors (No 2) [2013] FCCA 1898
Parties:
CENTRAL QUEENSLAND DEVELOPMENT CORPORATION PTY LTD (FORMERLY BLUECHIP DEVELOPMENT CORPORATION (GLADSTONE) PTY LTD) ACN 120 112 781 v SUNSTRUCT PTY LTD ACN 104 162 549, LORENZO MARIO REGINATO and ANTONY JAMES SCHOFIELD
SIDNEY CHARLES KNELL v SUNSTRUCT PTY LTD ACN 104 162 549, LORENZO MARIO REGINATO and ANTONY JAMES SCHOFIELD
File numbers:
QUD 826 of 2013 QUD 828 of 2013
Judges:
BESANKO, GILMOUR AND RANGIAH JJ
Date of judgment:
14 May 2015
Catchwords:
CORPORATIONS – appeal from Federal Circuit Court of Australia – administration – deed of company arrangement – effect of deed of company arrangement on the liability of the company for breach of contract under a counterclaim – whether deed of company arrangement compromised unsecured amount of the judgment against the company – amendment of the judgment.
COSTS – cost orders made against company on counterclaim – effect of deed of company arrangement – whether costs awarded against the company after administration compromised by deed of company arrangement – whether costs order was a “claim” within the meaning of s 444D(1) and s 553(1) of the Corporations Act 2001 (Cth) – appeal dismissed.
COSTS– costs awarded against non-party – whether the non-party’s conduct makes it just and equitable to make non-party costs order – whether notice must be given to non-party of intention to claim non-party costs – procedural fairness – whether the primary judge erred in his discretion to award non-party costs – appeal allowed.
[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.
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AGLC
Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63
Case
[2015] FCAFC 63
Decision Date
CaseChat Overview and Summary
In the case of Tattsbet Ltd v Morrow, the Court of Appeal of the Federal Circuit of Australia dealt with issues arising from a deed of company arrangement (DOCA) and the effect of that arrangement on various claims and costs orders. The dispute originated from a counterclaim filed by Sunstruct against Bluechip, which was later acquired by Tattsbet. The primary legal issues before the court involved the impact of the DOCA on the liability of Bluechip for breach of contract and the costs incurred by Sunstruct both in prosecuting the counterclaim and in defending Bluechip's claims.
The Court of Appeal first considered whether the DOCA compromised the liability of Bluechip for the breach of contract and the associated costs. The court found that the DOCA did not compromise these liabilities or costs under sections 444D(1) and 553(1) of the Corporations Act 2001. Consequently, the court upheld the primary judge's findings that Sunstruct's costs were not compromised by the terms of the DOCA. Furthermore, the court addressed the issue of whether the costs awarded against a non-party, Mr Knell, were just and equitable, particularly in light of procedural fairness. The Court found that while the primary judge's order for Mr Knell to pay Sunstruct's costs was influenced by the improper circumstances surrounding the DOCA, it did not amount to a denial of procedural fairness.
The appeal was allowed in part, with the court varying the costs order against Tattsbet and removing the requirement for Mr Knell to pay Sunstruct's costs. The Court remitted the matter back to the Federal Circuit Court for reconsideration of the application for non-party costs in light of the findings and reasons provided. The final orders included a variation of the costs payable by Tattsbet, removal of Mr Knell from the non-party costs order, and a requirement for Tattsbet to pay the respondents' costs of the appeal.
Orders
Orders of the court
1. The appeal be allowed in part.
2. Order 2 of the orders made by the Federal Circuit Court of Australia on 28 November 2013 that the appellant pay the first respondent $343,319.13 be varied by substituting for that amount the amount of $172,467.88.
3. Otherwise the appeal be dismissed.
4. The appellant pay the respondents’ costs thrown away by reason of the appellant’s abandonment of various of its grounds of appeal.
5. The costs, the subject of Order 4, be paid on an indemnity basis forthwith.
6. The appellant pay the respondents’ costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1. The appeal be allowed.
2. Order 4 of the orders made by the Federal Circuit Court of Australia on 28 November 2013 be varied such that the words “and Mr Sidney Charles Knell” be deleted.
3. The matter be remitted to the Federal Circuit Court of Australia for the application for non-party costs to be considered according to law and in light of these reasons.
4. The respondents pay the appellant’s costs.
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
Nor for the same reasons can such a costs claim be properly characterised as a contingent claim: see Foots at [36]. Conclusion I am satisfied, for these reasons, that Sunstruct’s costs of prosecuting the counterclaim against Bluechip were not compromised by the DOCA having regard to s 444D of the Corporations Act; the same can be said with respect to Sunstruct’s costs in defending the claims brought by Bluechip.KNELL COSTS APPEAL Mr Knell submits, as he did below, that no costs order could be made against him because, by reason of the DOCA and those relevant provisions, Sunstruct’s claim for costs against Bluechip was compromised. I do not accept this submission. No authority to support such a contention was cited. I see no basis in principle to support it. Even assuming that a claim for costs against Bluechip was barred by reason of the DOCA this does not preclude a claim being made for those costs against Mr Knell as a non-party. In any event, I have found that none of the costs awarded against Bluechip whether relating to the claim or the counterclaim were compromised by the terms of the DOCA having regard to s 444D of the Corporations Act. The only remaining challenge to the order of the primary judge that Mr Knell pay the costs of Sunstruct was on the ground that he was denied procedural fairness. The background was this. The primary judge ordered that both Bluechip and Mr Knell should pay Sunstruct’s costs of and incidental to the claim and counterclaim: Order 4 made 28 November 2013. In so ordering the primary judge had regard to certain conduct of Mr Knell on behalf of Bluechip which he described as being “more than merely confluent with the interests of the applicant” (Costs judgment at [102]). Significantly however, his Honour had particular regard to the circumstances surrounding the DOCA which he described as bearing “a certain stench” (at [114]). His Honour then concluded that except for the matter of the DOCA he may not have ordered costs against Mr Knell. The findings made are redolent with findings of impropriety:(a)The circumstances surrounding the DOCA were cynical on the part of Mr Knell and directed to his self-interest (at [102]).(b)Mr Knell used the corporate veil (via the DOCA) to stymie the respondents from recovery of their just entitlement by fashioning the DOCA (at [113]).(c)The circumstances surrounding the DOCA bear a stench (at [114]).(d)The DOCA was entered into because Mr Knell knew the trial (his evidence particularly) had gone badly for Bluechip and its case was at risk (at [114]). This was a significant incentive for Mr Knell to design a scheme (the DOCA) to permit Bluechip to retain any (unspecified) profits, ultimately for Mr Knell’s benefit (at [114]). (e)Mr Knell caused the DOCA to be entered into to defeat Sunstruct as a creditor (at [114]). It is apparent that the conclusions reached by the primary judge as to the circumstances surrounding the DOCA coming into existence, whilst not the only reasons, nonetheless formed the critical reasons for the orders made. I do not accept the respondents’ submissions to the contrary.