Tolcher v National Australia Bank Ltd

[2004] NSWSC 398

CITATION:	Tolcher v National Australia Bank Ltd [2004] NSWSC 398
HEARING DATE(S):	26/03/04 Written submissions - 01/04/04
JUDGMENT DATE:	12 May 2004
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Costs of all parties to be paid out of assets of company
CATCHWORDS:	PROCEDURE - costs - priority in winding up afforded to certain creditors providing financial support to liquidator - another creditor opposes liquidator's application - orders made favour all creditors referred to in liquidator's application but with two of three awarded less than liquidator sought - whether opposing creditor's role beyond that of "conventional contradictor" - whether all costs should be expense of winding up
LEGISLATION CITED:	Corporations Act 2001 (Cth), s.564 Supreme Court (Corporations) Rules 1999, rule 2.13
CASES CITED:	Hall v Interchase Corporation Ltd [2002] QSC 85 Re Ken Godfrey Pty Ltd (1994) 14 ACSR 610 Re Russell (2000) 35 ACSR 367 Tolcher v National Australia Bank Ltd (2004) 22 ACLC 397
PARTIES :	Raymond George Tolcher - Plaintiff National Australia Bank Limited - First Defendant Capital Finance Australia Limited - Second Defendant Fuji-Xerox Australia Pty Limited - Third Defendant
FILE NUMBER(S):	SC 3259/03
COUNSEL:	Mr R R I Harper - Plaintiff Mr J Stoljar - First Defendant Mr M A Ashhurst - Second Defendant Mr A D Weaver, Solicitor - Third Defendant
SOLICITORS:	Piper Alderman - Plaintiff Mallesons Stephen Jaques - First Defendant Kemp Strang - Second Defendant Bartier Perry - Third Defendant

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

BARRETT J

WEDNESDAY, 12 MAY 2004

3259/03 – RAYMOND GEORGE TOLCHER v NATIONAL AUSTRALIA BANK LIMITED & ORS

JUDGMENT ON COSTS

1 I am dealing with applications for costs orders in proceedings commenced by an originating process filed on 12 June 2003 by the liquidator of Lloyd Scott Enterprises Pty Limited (“LSE”).

2 By that originating process, the liquidator, as plaintiff, sought first an order under s.564 of the Corporations Act 2001 (Cth) affording priority to certain creditors in the winding up of LSE - those creditors being Fuji-Xerox Finance Australia Ltd (“Fuji”), National Australia Bank Ltd (“the National”) and Suncorp Metway Ltd (“Suncorp”) - and, second, a direction as to whether certain moneys in the liquidator’s hands were or were not trust moneys and, if they were, as to their disposition.

3 On 7 July 2003, it was ordered by consent that each of Fuji, the National and another creditor, Capital Finance Australia Pty Ltd (“Capital”), be added as a defendant. On the same day, I determined the second claim in the originating process by deciding that the sums in question were held upon trust for Fuji. The liquidator alone was represented before me on that occasion.

4 The parties’ attention was thereafter focussed upon the first claim in the originating process, being the claim for orders under s.564. After 7 July 2003, the matter was before the court on six occasions prior to 10 October 2003, the day on which I heard argument on the s.564 application and directed that remaining matters be dealt with by written submissions. The matter came before me again on 21 November 2003 following failure of Fuji to adhere to the directions of 10 October 2003. Fresh directions were made. Written submissions were in due course filed by all parties. My judgment on the s.564 aspect was delivered on 3 February 2004. The decision was that priority should be afforded to each of Fuji, the National and Suncorp but, as to the first two, to an extent less than that sought by the liquidator and those respective parties: see Tolcher v National Australia Bank Ltd (2004) 22 ACLC 397.

5 Two costs orders have been made to this point. On 22 September 2003, Campbell J ordered that the liquidator as plaintiff pay the costs of Capital of an interlocutory process of 26 August 2003 concerning production of documents. On 21 November 2003, I ordered that Fuji pay costs of all other parties consequent upon its failure to comply with the directions made on 10 October 2003. These costs orders stand. Otherwise, to the extent that costs were dealt with at all on earlier occasions, they were reserved.

6 In turning to remaining matters of costs, I deal first with costs of and incidental to the liquidator’s application for directions as to the status of moneys in his hands, being the matter determined by me on 7 July 2003. That aspect as to costs is uncontroversial. The application for directions was regularly and properly brought by the liquidator. The costs of and incidental to the application for directions should be paid out of the assets of LSE as part of the costs and expenses of the winding up.

7 The question of costs in relation to the s.564 aspect is far from uncontroversial. It is submitted on behalf of the liquidator that the appropriate order is an order that Capital pay the costs of the liquidator and the National, either in whole or as to at least two-thirds; and that the costs of Fuji and Suncorp should be paid out of the assets of LSE as costs and expenses of the winding up. The National also adopts that stance. Fuji’s position is no more than that its costs should be paid out of the assets of LSE as costs and expenses of the winding up. Capital resists the suggestion that it should pay anyone’s costs. Its position is that all costs, including its own, should be paid out of the assets of LSE as part of the costs and expenses of the winding up.

8 It is, I think, common ground that, in the ordinary course of events, the costs of all parties in relation to a proceeding of this kind in which the court makes orders under s.564 are properly cast upon the assets of the company concerned. Reference was made, by way of general principle, to the following statement of Hayne J in Re Ken Godfrey Pty Ltd (1994) 14 ACSR 610:

“Ordinarily speaking, I would consider that it would be appropriate for a creditor that is not one of the indemnifying creditors and which chose to appear on the return of such an application as this to have its costs of the application, and indeed to have its costs of the application as part of the costs and expenses of the winding up.”

9 A creditor who appears to oppose the grant of relief eventually awarded will be within this general rule. But special circumstances may require some other outcome in relation to such an opposing creditor. It is necessary to refer to some cases where special circumstances have existed.

10 In the Ken Godfrey case, Hayne J refused to order that there be cast upon the company’s assets the costs of an opposing creditor whose opposition had not been successful and whose attitude had given rise to the litigation pursuit of which had been assisted by the creditors afforded priority under s.564. In Re Russell (2000) 35 ACSR 367, Santow J was called upon to deal with a situation where two creditors not singled out for preference under the section had, by way of “strenuous opposition”, engaged in “conventional and vigorously contested litigation” in which they failed to establish any of the grounds of opposition they pressed in relation to the grant of the preferred position sought for indemnifying or assisting creditors.

11 Santow J made the following observations:

“Essentially, there is a distinction between acting as a conventional contradictor putting the claimant creditors to proof and the fierce contest that occurred here with its wholly unsuccessful outcome for the banks; see by analogy in the case of a successful application under s 447A of the Corporations Law despite strenuous opposition, in Re Australasian Memory Pty Ltd; Brien v Australasian Memory Pty Ltd (2000) 34 ACSR 158 esp at [15] where I said:
‘Nor is it irrelevant to note the scope of the wide-ranging resistance mounted by the second defendant. It went well beyond the merits of the application to include a constitutional challenge and a challenge based on interpretation of the relevant provisions. That was a forensic choice properly open to the second defendant. But he cannot complain if, having lost so far, he has to bear the costs. The proceedings bore all the hallmarks of conventional and vigorously contested litigation. This was not a case of dispensation for the administrators resisted by those to whom the duty to convene the meetings was primarily owed, namely the creditors. In those circumstances the proper order is for costs to follow the event. Creditors should not suffer by any of those costs being awarded against the company, where the costs are so substantial and there is already a deficiency of assets.’”

12 In Hall v Interchase Corporation Ltd [2002] QSC 85, an opposing creditor was not awarded costs out of the assets of the company but an application that that creditor be ordered to pay costs of other parties was not successful. The reason for these decisions on costs, expressed in the ex tempore judgment of Byrne J, was “the nature of the contest, and by that I mean the fight over matters of credit”.

13 The cases decided by Hayne J, Santow J and Byrne J, although not directly in point, are of some assistance in deciding the approach that should be taken in relation to Capital in the present case. Capital, like the opposing creditors in those cases, pursued with vigour the line that the priority sought in respect of the debts of creditors proposed for preferential treatment should not be granted as the liquidator proposed. Capital’s position was that no priority should be afforded to the National and that some reduced priority should be afforded to Fuji. In relation to the proposal involving Suncorp it offered no opposition. But, unlike the opponents or contradictors in the other cases to which I have referred, Capital was not wholly unsuccessful in its contentions. Nor was Capital alone in opposing the making of the orders the liquidator sought. Fuji opposed the grant of any priority to the National. Suncorp was not a party but conveyed to the court through the liquidator submissions against the grant of any priority to Fuji in respect of assistance given while Mr Tolcher was administrator under Part 5.3A and before he became liquidator. The National alone generally supported the priority regime the liquidator proposed.

14 Participation in the proceedings by Capital, like the participation of Fuji and the submissions conveyed by Suncorp through the liquidator, played a part in the processes that led to the eventual result – a result less favourable to all relevant creditors (except Suncorp) than argued by the liquidator with the support of the National and more favourable to some creditors (except Suncorp) than sought by some other or others of them. In short, I am satisfied that all parties – the plaintiff, the National, Capital and Fuji – put before the court matters that played a constructive role in producing the result that eventually emerged.

15 It is submitted by the plaintiff, supported by the National, that Capital’s role went beyond that of a “conventional contradictor” (to use the expression of Santow J in Russell). I am not satisfied that that is so, particularly in light of the results to which I have just referred. It is true that Capital’s opposition was vigorous. But I am not satisfied that it was ill-directed or perverse. Indeed, it was, to a degree, successful.

16 The appropriate outcome on the s.564 aspect, in my opinion, is that the costs of the liquidator, the National, Capital and Fuji should be paid out of the assets of LSE as part of the costs and expenses of the winding up.

17 The liquidator submits that there should be a similar order in relation to Suncorp. The fact is, however, that Suncorp is not a party to the proceedings, did not seek leave under rule 2.13 of the Supreme Court (Corporations) Rules 1999 and played no part in the hearing, although it did choose to give some submissions to the liquidator who in turn chose to put them before the court. A creditor which proceeds in that way does not, in my opinion, bring itself within the contemplation of the court’s power to award costs under s.76 of the Supreme Court Act 1970, broad though that power is.

18 The order of the court is that, subject to and without prejudice to the orders for costs made on 22 September 2003 and 21 November 2003, the costs of each of the plaintiff, the first defendant, the second defendant and the third defendant of and incidental to the originating process filed on 12 June 2003, assessed on the party and party basis, be paid out of the assets of Lloyd Scott Enterprises Pty Limited as part of the costs and expenses of the winding up.

Last Modified: 05/13/2004