Timbercorp Finance Pty Ltd v Collins (No 2) - [2017] VSC 65

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2014 02972

BETWEEN:

TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190)	Plaintiff
v
DOUGLAS JAMES COLLINS & ORS	Defendants

-AND-
S ECI 2014 00419

BETWEEN:

TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190)	Plaintiff
v
PETER JOHN WHITE & ANOR	Defendants

---

JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	6 February 2017
DATE OF JUDGMENT:	28 February 2017
CASE MAY BE CITED AS:	Timbercorp Finance Pty Ltd v Collins & Ors (No 2)
MEDIUM NEUTRAL CITATION:	[2017] VSC 65	First revision: 2 March 2017

---

COSTS — Test cases — Indemnity costs — Whether successful plaintiff should be paid its costs by the defendants —Whether indemnity costs a ‘penalty’ — Successful defendant — Sanderson order.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Batt one of Her Majesty’s Counsel with Dr C O Parkinson and Ms H A Tiplady	Mills Oakley Lawyers
For the Defendants Collins and White	Mr M D Wyles, one of Her Majesty’s Counsel with Ms F L Shand and Mr D J Fahey	M + K Lawyers
For Timbercorp Securities Ltd	Dr O Bigos	Arnold Bloch Leibler

HIS HONOUR:

On 15 December 2016 reasons for judgment were published in four proceedings in which the plaintiff, Timbercorp Finance Pty Ltd, sought recovery of loans made to the defendants to finance investments in various Timbercorp managed investment schemes. Final orders have not yet been made in the Collins and White proceedings, although the parties have agreed on the amounts for judgment. The outstanding issue between the parties relates to costs and declaratory relief.

The plaintiff contended that it was entitled to costs against the defendants in each proceeding on an indemnity basis, pursuant to the terms of its loan agreement with each defendant. Clause 4 of each loan agreement provides that the borrower must pay to the lender its costs of enforcing the agreement on a full indemnity basis. The defendants resisted such an order on three grounds. First, there were special circumstances that should excuse the defendants from any liability for costs. The plaintiff’s costs should be the liquidators’ costs in the liquidation. Second, the contractual provisions requiring full indemnity costs was a penalty and unenforceable. Third, indemnity costs overcompensated the plaintiff.

Timbercorp Securities Ltd was the third defendant in the Collins proceeding and the second defendant in the White proceeding. As a successful defendant, it sought an order that the unsuccessful defendants pay its costs, through a Bullock or Sanderson order. It also sought a declaration in the form of paragraph A of the prayer for relief in its counterclaim against the defendants. The defendants resisted both applications by Timbercorp Securities.

The defendants’ contention that the contractual provision requiring full indemnity was a penalty, and unenforceable, may be dealt with shortly. The defendants relied upon the decision of the High Court in Paciocco & Anor v Australian and New Zealand Banking Group Ltd,[1] in…

Grounds of appeal

[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.

Keep reading for free

Create a free CaseChat account to read Timbercorp Finance Pty Ltd v Collins (No 2) and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2017] VSC 65
Decision Date: 28 February 2017

CaseChat Overview and Summary

In the case of Timbercorp Finance Pty Ltd v Collins (No 2), the plaintiff, Timbercorp, sought indemnity costs from the defendants, Collins, following a successful defence of a claim brought by the plaintiff. The matter was heard in the Supreme Court of Queensland. The plaintiff argued that as the successful party in the underlying claim, it should be entitled to indemnity costs from the defendants, who were the unsuccessful party in that claim. The defendants contested this, arguing that indemnity costs were a form of penalty and therefore not allowable. Additionally, the defendants sought a Sanderson order, which would require the plaintiff to pay their own costs of the indemnity costs application.

The central legal issue before the court was whether the successful party in a test case is entitled to indemnity costs from the unsuccessful party, and if such costs could be characterised as a penalty. The court had to consider the principles governing indemnity costs, the nature of test cases, and the appropriateness of a Sanderson order in this context. The court also had to determine the proper allocation of costs in the indemnity costs application itself.

The court found that the plaintiff was entitled to indemnity costs from the defendants as the successful party in the underlying claim. The court rejected the defendants' argument that indemnity costs were a penalty, holding that they were a reasonable and necessary consequence of the successful party's right to recover costs. The court further held that a Sanderson order was appropriate, given the defendants' unreasonable position in contesting the indemnity costs application. The court ordered the defendants to pay the plaintiff's costs of the indemnity costs application, and the plaintiff to pay their own costs of that application.

In summary, the court held that the plaintiff was entitled to indemnity costs from the defendants, rejected the argument that such costs were a penalty, and made a Sanderson order in favour of the defendants. The final orders reflected these determinations, with the defendants ordered to pay the plaintiff's costs of the indemnity costs application, and the plaintiff to pay their own costs of that application.

Orders