Vero Insurance Ltd v Kassem

[2010] NSWSC 1481

CITATION:	Vero Insurance Ltd v Kassem [2010] NSWSC 1481
HEARING DATE(S):	07/09/10
JUDGMENT DATE :	17 December 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Order that the plaintiff pay the first defendants' costs of the proceedings.
CATCHWORDS:	PROCEDURE - costs - where company administrators, as first defendants, serve affidavits but do not seek to be heard at trial - defence left in hands of second defendant - first defendants' affidavits not read - plaintiff unsuccessful - whether first defendants should be awarded costs - whether any such costs should exclude costs of affidavits not read
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 445D, 1321
CATEGORY:	Consequential orders
CASES CITED:	Barristers Board of Western Australia v Tranter Corporation Pty Ltd (1976) WAR 65 In the Marriage of Crowe [1988] FLC 91-983 Kirwan v Cresvale Far East Pty Ltd [2002] NSWCA 395; (2002) 44 ACSR 21 Leaders Shoes (Aust) Pty Ltd v National Insurance Co of New Zealand Ltd [1968] 1 NSWR 344 Vero Insurance Ltd v Kassem [2010] NSWSC 838; (2010) 79 ACSR 330
PARTIES:	Vero Insurance Limited - Plaintiff Ozem Azzam Kassem and Andrew James Barnden as Joint Administrators of Ungul Properties Pty Ltd - First Defendants Ungul Properties Pty Ltd - Second Defendant
FILE NUMBER(S):	SC 2009/289555
COUNSEL:	Mr A P Lo Surdo - Plaintiff Mr A Spencer - First Defendant Mr P Harkin - Second Defendant
SOLICITORS:	Mills Oakley Lawyers - Plaintiff Leonard Legal - First Defendants Colin Biggers & Paisley - Second Defendant

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

BARRETT J

FRIDAY, 17 DECEMBER 2010

2009/289555 VERO INSURANCE LTD v OZEM AZZAM KASSEM & ORS

JUDGMENT

1 I am dealing with a question of costs that remains for determination in these proceedings.

2 Following the publication of reasons on 30 July 2010 (Vero Insurance Ltd v Kassem [2010] NSWSC 838; (2010) 79 ACSR 330), I made orders on 25 August 2010 that the proceedings be dismissed, that the plaintiff (“Vero”) pay the costs of the second defendant (“Ungul”) and that the matter be listed for a hearing on the question of costs as between Vero and the first defendants (now the administrators of a deed of company arrangement executed by Ungul and, at the time of relevant events, the administrators under its voluntary administration).

3 It is that last matter with which I am now concerned, having heard argument on 7 September 2010.

4 As noted in the reasons of 30 July 2010, the administrators, despite having filed defences, tendered no evidence, took no part in the hearing and were given leave to withdraw.

5 Vero’s principal position is that, although it failed in all its claims in the proceedings, the administrators should not have an order for costs against Vero. The secondary submission is that, if costs are awarded at all to the administrators, the costs should be limited to costs of preparing and filing their defence, since the costs of preparing affidavits not relied on by anyone were effectively wasted.

6 The administrators say that their action in not participating in the hearing was reasonable because it was by then clear that Ungul would be an active and sufficient contradictor and there was, in effect, nothing they could usefully add; also that they had acted responsibly and consistently with the duties of their office in making available affidavits that might be taken advantage of by any other party minded to make use of them.

7 Attention was drawn, in the latter connection, to the reference by Young CJ in Eq, in Kirwan v Cresvale Far East Pty Ltd [2002] NSWCA 395; (2002) 44 ACSR 21 at [429] to “the duty of any reasonable administrator in seeking to put before the court material which the court would need to decide the issues before it”.

8 Although Ungul is not directly interested in the question whether the administrators obtain a costs order against Vero, it has very distinct indirect interest. This is because of a provision of the deed of company arrangement which, in the usual way, gives the administrators an entitlement to be indemnified out of the deed fund “and/or any Assets of the Company” for all liabilities they incur as deed administrators and, relevantly for present purposes, as administrators under the anterior voluntary administration.

9 The legal expenses actually incurred by the administrators in connection with this litigation are within this clause of the deed of company arrangement so that, at a practical level, the circumstance that the administrators do not have the benefit of a costs order against Vero (or are awarded only limited costs) means that it is the deed fund and therefore ultimately Ungul that suffers.

10 I am of the opinion that I should not take the operation of the deed of company arrangement into account in deciding the question of costs as between Vero and the administrators. That decision should be made by reference to the circumstances of the litigation alone.

11 The conduct of the administrators – and, in particular, Mr Barnden (the chairman of the meeting of creditors) – lay at the centre of the case. One of the principal claims was a claim under s 1321 of the Corporations Act 2001 (Cth) for an order reversing a decision made by Mr Barnden. In that respect and also in relation to the claim under s 445D, Vero failed in its attempt to impugn the conduct of the administrators.

12 It was entirely reasonable for the administrators to prepare and swear affidavits. It was their conduct that was called into question. The fact that those affidavits were served meant that they were available to be read by any party: Barristers Board of Western Australia v Tranter Corporation Pty Ltd (1976) WAR 65; Leaders Shoes (Aust) Pty Ltd v National Insurance Co of New Zealand Ltd [1968] 1 NSWR 344; In the Marriage of Crowe [1988] FLC 91-983. There is no basis on which the administrators should be deprived of their costs in connection with the affidavits.

13 Nor is there any basis on which the administrators should be deprived of their costs altogether. As I have said, their conduct was impugned and they were entitled to act as they did including, according to their ultimate decision, leaving it to Ungul to defend that conduct when they saw that Ungul intended to do so in an appropriate and effective way. Indeed, the administrators might have attracted valid criticism had they taken an active part in the hearing when it had become clear that there was no objective need for them to do so.

14 There is no reason why costs as between Vero and the administrators should not follow the event.

15 The order is that the plaintiff pay the first defendants’ costs of the proceedings.

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