The J. Aron Corporation v Newmont Yandal Operations Pty Ltd and 2 Ors

[2005] NSWSC 182

CITATION:	The J. Aron Corporation & Anor v Newmont Yandal Operations Pty Ltd & 2 Ors [2005] NSWSC 182
HEARING DATE(S):	11/02/05
JUDGMENT DATE :	11 March 2005
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Order that costs of defendants of and incidental to unsuccessful application for interlocutory injunction be paid by plaintiffs, such costs to be assessed on the indemnity basis. Order that costs of defendants and of persons heard by leave of and incidental to hearings on costs be paid by plaintiffs.

CATCHWORDS:	PROCEDURE - costs - whether, on new evidence, possibility of different result of interlocutory application shown such as to affect outcome on costs - whether persons granted leave to be heard under rule 2.13 of Supreme Court (Corporations) Rules 1999 should be awarded costs - whether foreign corporation seeking interlocutory injunction but unable to show financial substance or instructions to give undertaking as to damages should be ordered to pay indemnity costs
CASES CITED:	Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 Hotline Communications Ltd v Hinkley [1999] VSC 74 J Aron & Company v Newmont Yandal Operations Pty Ltd (2003) 47 ACSR 243 J Aron Corporation v Newmont Yandal Operations Pty Ltd (2004) 183 FLR 90 Knight v F P Special Assets Ltd (1992) 174 CLR 178 Oshlak v Richmond River Council (1988) 193 CLR 72 Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] 48 ACSR 681
PARTIES:	The J. Aron Corporation and The Goldman Sachs Group, Inc - Plaintiffs Newmont Yandal Operations Pty Ltd - First Defendant Clynton Court Pty Ltd (subject to a deed of company arrangement) - Second Defendant Mark Anthony Korda and Mark Francis Xavier Mentha - Third Defendants The Companies Listed in Schedule 1 (As set out in the Amended Statement of Claim) - Fourth Defendants
FILE NUMBER(S):	SC 4666/03
COUNSEL:	Mr V.R.W. Gray - Plaintiffs Mr P.M. Wood - First Defendant Ms H.M. Symon SC - Second and Third Defendants Mr D.M. Fairweather - Byrnecut Mining Pty Ltd and Bowler Enterprises Pty Ltd Mr J.T. Johnson - 338 Creditor Employees
SOLICITORS:	Abbott Tout - Plaintiffs Arnold Bloch Leibler - First Defendant Gadens Lawyers - Second and Third Defendants Maxim Litigation Consultants - Byrnecut Mining Pty Ltd and Bowler Enterprises Pty Ltd Maurice Blackburn Cashman - 338 Creditor Employees

LOWER COURT JURISDICTION:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

FRIDAY, 11 MARCH 2005

4666/03 – THE J. ARON CORPORATION & ANOR v NEWMONT YANDAL OPERATIONS PTY LTD (ADMINISTRATORS APPOINTED) & 2 ORS - COSTS

JUDGMENT

1 On 11 February 2005, a hearing on costs was re-opened, further evidence was read and further submissions were made. It is necessary to refer to the events that preceded the re-opened hearing.

2 First, however, I must mention some matters of nomenclature. When I refer to “the plaintiffs”, I mean the two corporations which are now the plaintiffs by virtue of an amendment or reconstitution of the proceedings at a point after 8 September 2003. References to “the original plaintiff” are references to “J Aron & Co” or “J Aron & Company”, a supposed entity by which the proceedings were purportedly initiated. At the hearing on 8 September 2003, “J Aron & Co” or “J Aron & Company” was represented to be a United States corporation by the lawyers supposedly instructed by it. It later emerged that “J Aron & Company” was a name under which the present plaintiffs carried on business in partnership.

3 On 8 September 2003, I heard an interlocutory application (ostensibly brought by the original plaintiff) for an injunction. The application was dismissed late on that day: see J Aron & Company v Newmont Yandal Operations Pty Ltd (2003) 47 ACSR 243. Argument on costs was heard on 1 April 2004. Judgment was reserved. On 16 April 2004, the plaintiffs filed an application seeking leave to re-open the costs argument and to lead further evidence. That application was heard on 11 May 2004. Judgment was delivered on 22 June 2004. Re-opening was allowed for limited purposes: see J Aron Corporation v Newmont Yandal Operations Pty Ltd (2004) 183 FLR 90.

4 At the re-opened hearing on costs on 11 February 2005, counsel for the plaintiffs read an affidavit of Mr Ryckmans, the plaintiffs’ solicitor, and tendered exhibits to it. Counsel for the second and third defendants read an affidavit of the solicitor for those parties. There was no other additional evidence.

5 It was submitted on behalf of the plaintiffs on 11 February 2005 that there were some matters relevant to the application heard on 8 September 2003 that were referred to in affidavits (or exhibits to affidavits) that were before the court on that occasion but did not come to the court’s attention, in the sense that, while they would have been discovered upon a close reading of large documents, they were not actually pointed out to the court. The circumstances surrounding the hearing and delivery of judgment as a matter of urgency on the evening of the same day were not such as to allow the court time to make any examination of the documentary evidence independently of being taken by the respective counsel to parts of it deemed relevant and material by them.

6 The first matter to which the plaintiffs refer appears from an affidavit of one of the administrators, Mr Korda, sworn on the day of the hearing, 8 September 2003. It concerned the results of voting at certain meetings of creditors. That evidence, it is said, caused the court to take the view that certain resolutions had been passed at meetings of the creditors of all relevant companies, whereas detailed statistics in annexures or exhibits showed, according to the plaintiffs, that no such resolutions had been passed in the case of some companies, being wholly owned subsidiaries of the principal company. The plaintiffs say that that circumstance, if brought to the court’s attention, might have had a bearing on the result since, as the plaintiffs see matters, the decision proceeded on the basis that valid resolutions had been passed by the creditors of all companies. The correctness of that proposition is to be tested in another (and as yet unresolved) aspect of these proceedings. For the moment, it is sufficient to say that there are plausible reasons to argue that it is not correct. But, had the evidence in question been affirmatively drawn to the court’s attention on 8 September 2003, the court would have appreciated the existence of an issue as to whether the resolutions had been duly passed and, according to the plaintiffs’ viewpoint, might have drawn conclusions favourable to them on that matter.

7 The second matter concerns the value of the Wiluna gold mine. The materials that went to creditors in connection with their meetings contained expressions of opinion as to the relative merits, from a value viewpoint, of a deed of company arrangement proposal and the alternative of winding up. Implicit in such expressions of opinion were views as to the value of the Wiluna gold mine. The plaintiffs say that there were in the affidavit materials before the court on 8 September 2003, but not expressly drawn to the court’s attention, references to things which, if subjected to scrutiny and deduction, might have suggested that the Wiluna gold mine value was in reality higher than that reported by Ernst & Young. Those references need not be recorded here. They appear in a prospectus of Agincourt Resources Limited dated 28 November 2003, an extract from which is at Tab 19 of the exhibit to Mr Ryckmans’ affidavit. That prospectus does not itself state any value of the Wiluna gold mine, although it refers to a formula to be applied to calculate its purchase price. From that formula – which of itself produces no fixed figure – the plaintiffs derive no direct assistance. But they seek to extrapolate by pointing to, first, evidence that the Wiluna gold mine was the most significant asset of Agincourt Resources and, second, the total market capitalisation of Agincourt Resources on the stock exchange.

8 At the re-opened hearing on costs, the plaintiffs agitated before me again a question on which I expressed opinions in my judgment of 22 June 2004, namely, whether, upon a contested hearing where all parties are legally represented, a defendant has a duty to draw the court’s attention to aspects of affidavit evidence filed by that defendant which are material to the question brought before the court by the plaintiff for determination. For reasons to which I am about to come, there is no need for any discussion of that matter beyond the discussion in the judgment of 22 June 2004.

9 Let it be assumed that the two matters to which the plaintiffs seek to refer – the voting statistics and a possible misapprehension as to the mine valuation – had been squarely presented at the hearing on 8 September 2003. What effect would that have had? The second matter concerning value is said to have had potential relevance to the question whether the outcome under the proposed deed of company arrangement was likely to be better or worse for creditors than a winding up. But my judgment of 8 September 2003 (at paragraph 6) proceeded on the basis that there were different views about what was, or might have been, the value of the NYOL Group on an assumed winding up. After referring to the existence of “various pieces of evidence referring to those views”, I said:

“It is sufficient to say that no reliable findings on that matter can be made at this stage.”

Direct reference to the conjectural matters regarding mine valuation to which the plaintiffs now refer would not have changed that conclusion.

10 In relation to voting results, the judgment referred only to voting within the principal company and proceeded on the footing that, by reason of related party voting, the required majority may not have been obtained. The voting statistics upon which the plaintiff now focuses would have reinforced – perhaps increased – the possibility that required majorities might not have been obtained.

11 But both these aspects of the evidence would have gone to the aspect of the injunction application concerned with whether there was a serious question to be tried. The voting statistics aspect (but not the conjectural valuation aspect) might have contributed to a finding that there was a serious question to be tried. The reality is, however, that the application was disposed of on the basis of an acceptance that there was a serious question to be tried: see paragraph 9. That being so, the additional evidence would not have produced a better outcome for the plaintiffs on that issue.

12 The outcome on the application for an interlocutory injunction turned on the balance of convenience. There were three aspects to that, one dealt with at paragraphs 10 to 12, a second at paragraphs 13 to 15 and the third at paragraphs 16 to 20. The matters concerning the voting statistics and the value of the mine could not conceivably have affected the thinking and reasoning on any of those aspects.

13 In short, there is no reason to think that the two matters to which the plaintiffs now point would, if explicitly placed before the court, have produced an outcome different from that which actually emerged on 8 September 2003. That being so, I must, for the purposes of deciding the costs orders to be made in consequence of the decision of 8 September 2003, go back to the submissions that were made on 1 April 2004 against the background as it then existed, that is, that the original plaintiff had been unsuccessful in their application for an interlocutory injunction.

14 The first matter to be addressed is the position of non-parties granted leave to be heard. On 8 September 2003, Mr Whelan QC and Mr Crutchfield of counsel appeared for Newmont Australia Ltd and Yandal Bond Co Ltd. This was in accordance with leave under rule 2.13 of the Supreme Court (Corporations) Rules previously granted. Mr Gleeson SC and Mr Howard of counsel appeared for Byrnecut Mining Pty Ltd and Bowler Enterprises Pty Ltd pursuant to like leave granted on that occasion. Also by leave under rule 2.13, Mr Johnson of counsel appeared for employee creditors.

15 A grant of leave under rule 2.13 does not involve participation by the grantee as if a party. In addition, a particular regime applies under rule 2.13(2) as to the awarding of costs against such a person. Those factors, coupled with comments by members of the High Court in Knight v F P Special Assets Ltd (1992) 174 CLR 178, caused me to say in Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] 48 ACSR 681 at p.686:

“[S]ome very special factor outside the ordinary and expected course of events and engendering a justifiable expectation of compensation in the mind of the non-party would have to be found before any relevant aspect of the comprehensive jurisdiction with respect to costs might be regarded as properly and regularly invoked in favour of a non-party as against a party. In other words, such an award, if ever appropriate, will be extraordinary and exceptional. Someone who seeks and is granted leave under rule 2.13(1) chooses a course entailing the limited costs exposure described in rule 2.13(2). Such a person can have very little expectation of being awarded costs.”

16 There is nothing in the circumstances of the present case that would cause the three sets of grantees of leave under rule 2.13 to be seen as occupying some special position or meriting some special treatment with respect to costs. They chose a course which limited their potential exposure on costs. Their interests and submissions were aligned with those of the defendants yet they did not seek to become defendants and thereby to join the group that would have stood to receive a single award of costs, if successful.

17 The defendants who took an active part in the proceedings were the second, third and fourth defendants, that is, the administrators and the companies in administration. They seek an order for costs against the plaintiff and submit that the costs should be assessed on the indemnity basis and be payable forthwith.

18 It is the contention of the plaintiffs that costs should be reserved – or, more precisely, that they should continue to be reserved, the position being that, at the conclusion of the judgment of 8 September 2003 (paragraph 22), I said:

“All costs of the application with which I have dealt today, including costs of the parties to whom leave to be heard was granted, are reserved.”

19 If the contention of the plaintiffs in this respect were accepted, there would be no order concerning the costs of the interlocutory hearing until the conclusion of the substantive proceedings. Because of the positions the parties have taken in arguing matters of costs at length, that would not be a satisfactory outcome. In my opinion, the appropriate course is for me to determine now where liability for the costs of the interlocutory hearing should fall and on what basis costs should be assessed.

20 The plaintiffs were unsuccessful in their application for interlocutory relief. On ordinary principles, therefore, they should pay the defendants’ costs of and incidental to that application. There is no apparent basis for a departure from that general rule.

21 As to the basis of assessment, the defendants say that their costs should be assessed on the indemnity basis. Submissions in support of that proposition were made on 1 April 2004 by Mr Dick of counsel who, in large measure, adopted submissions made by Mr Crutchfield of counsel who, on that occasion, appeared for two of the parties granted leave under rule 2.13. Both sets of submissions must therefore be taken into account. The following are the essential points made:

1. The original plaintiff (thought by all on 8 September 2003 to be a United States corporation with no presence in the jurisdiction) failed largely because it was unable to show that it had given instructions to its counsel to proffer the usual undertaking as to damages. In addition, there was no evidence of the ability of the original plaintiff to meet any undertaking as to damages. I referred, in the latter connection, to an observation of Warren J in Hotline Communications Ltd v Hinkley [1999] VSC 74.
2. The original plaintiff had ostensibly been before the court on 3 September 2003 when an injunction was granted ex parte. On that occasion, Macdougall J referred to the fact that the original plaintiff was a foreign company and to the question of security for the undertaking as to damages.
3. After 8 September 2003, it emerged that “J Aron & Co” or “J Aron & Company” was not a United States corporation at all but was a name under which certain United States entities (being the present plaintiffs) carried on business in partnership. This, it is said, serves to exacerbate retrospectively the seriousness of the shortcomings that contributed to the original plaintiff’s failure on the balance of convenience on 8 September 2003.

22 These factors are said to amount to “relevant delinquency” of the kind referred to by Gaudron and Gummow JJ in Oshlak v Richmond River Council (1988) 193 CLR 72 as a basis for the award of indemnity costs. I agree. The parties intending to move the court on 8 September 2003 were the present plaintiffs. But they did not sue in a way appropriate to their status. They allowed the court to be told that the plaintiff was a non-existent United States corporation. In addition, they did not arm the lawyers put forward by them as the representatives of the purported plaintiff with the ability to provide the virtually essential “price” of an interlocutory injunction; nor did they attempt to attend to the important matter of being able to show that the ostensibly foreign (but in fact non-existent) plaintiff had any financial substance at all – and this was despite the matter having been adverted to by the judge presiding when the earlier ex parte application was made.

23 It was submitted on behalf of the plaintiffs that the defendants always knew that “J Aron & Co” or “J Aron & Company” was a partnership of the present plaintiffs and that the holding out of a United States corporation of that name as the plaintiff is a matter of relative unimportance. Even if this were so, the lack of preparedness in terms of demonstration of financial substance and instructions to proffer the necessary undertaking to the court applied in relation to the two “real” plaintiffs just as it appeared at the time to apply in relation to the original plaintiff (or supposed plaintiff). That submission therefore does not assist the plaintiffs.

24 On 8 September 2003, the plaintiffs came to court (or purported to have “J Aron & Co” or “J Aron & Company” come to court) in a state where they were unprepared to meet fundamental requirements for the grant of relief by way of interlocutory injunction. They caused the defendants to be brought to court in circumstances where they should have known that the inability to satisfy that fundamental requirement would, as a matter of virtual certainty, be fatal, as it turned out to be. That is “relevant delinquency”. The defendant’s costs of the interlocutory application should be assessed on the indemnity basis.

25 The remaining question is whether there should be an order that the defendant’s costs so assessed be paid forthwith. Reference was made, in that connection, to the criteria identified in Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 at [10] to [13]. The first consideration is whether the hearing in question can be regarded as sufficiently self-contained and detached or detachable from proceedings yet to be heard to make it seem just for an actual payment to be made before the conclusion of the proceedings. As to that, I am not satisfied that the application heard on 8 September 2003 was of such a self-contained character, particularly when it is noticed that the point about the voting statistics upon which the plaintiffs put so much store is a prominent issue for future determination.

26 The second consideration is any unreasonable conduct on the part of the party ordered to pay costs. I have already referred to “relevant delinquency” warranting assessment on the indemnity basis. Such assessment sufficiently recognises the plaintiffs’ “unreasonable conduct”.

27 The third consideration is that a long time may pass until final disposition. In the present case, some seventeen months have now elapsed since the hearing in question. The proceedings remain on foot and are under case management. The significance that the third consideration may have in other cases is largely dissipated by the time that has already passed.

28 There will accordingly be an order that the defendants’ costs of and incidental to the interlocutory hearing on 8 September 2003 be paid by the plaintiffs, such costs to be assessed on the indemnity basis.

29 One other matter of costs requires attention. It concerns the costs of the costs argument on 1 April 2004 and the further hearing on costs that occurred on 11 February 2005 which occurred as a result of the decision on 22 June 2004 to re-open (the costs of the application to re-open were dealt with in the judgment of 22 June 2004). The entities granted leave under rule 2.13 in respect of the hearing on 8 September 2003 were made respondents to the interlocutory process seeking re-opening on costs. As regards the whole issue of costs, therefore, it is appropriate for them to be treated as parties. And given the outcome on the question of costs of the application for an interlocutory injunction, both those persons and the defendants as such should have an order for costs against the plaintiffs.

30 The orders are accordingly as follows:

1. Order that the costs of the defendants, being costs of and incidental to the application for an interlocutory injunction determined on 8 September 2003, be paid by the plaintiffs, such costs to be assessed on the indemnity basis.
2. Order that the costs of the defendants and the costs of persons granted leave pursuant to rule 2.13 of the Supreme Court (Corporations) Rules 1999 to be heard upon that application for an interlocutory injunction, being costs of and incidental to the hearings on costs on 1 April 2004 and 11 February 2005, be paid by the plaintiffs.
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