Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 4)

[2012] FCA 1206

FEDERAL COURT OF AUSTRALIA

Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 4) [2012] FCA 1206

Citation:	Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 4) [2012] FCA 1206
Parties:	ANTHONY JOHN WARNER AND STEVEN KUGEL IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017 and BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017 v KEN YUK KEE HUNG, AUSTCORP INTERNATIONAL LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 003 132 090, ALFRED CHI WAI WONG, DANNY KAM YUN AU-YEUNG and SHAN PEI INVESTMENT LIMITED
File number:	NSD 34 of 2010
Judge:	EMMETT J
Date of last submissions:	27 August 2012
Date of judgment:	2 November 2012
Place:	Sydney
Division:	GENERAL DIVISION
Category:	No catchwords
Number of paragraphs:	40
Counsel for the plaintiffs:	N Cotman SC, SA Wells
Solicitor for the plaintiffs:	Breene & Breene
Solicitor for the first and second defendants:	John Tomaras and TD Tzovaras of JT Law
The third defendant made submissions personally
Counsel for the fourth defendant:	F Lever SC
Solicitor for the fourth defendant:	D Wright of Willis & Bowring
The fifth defendant made no submissions
Solicitor for Gujarat NRE Minerals Ltd:	B Gillard of Gillard Consulting Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 34 of 2010

IN THE MATTER OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017

BETWEEN:

ANTHONY JOHN WARNER AND STEVEN KUGEL IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
First Plaintiffs

BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
Second Plaintiff

AND:

KEN YUK KEE HUNG
First Defendant

AUSTCORP INTERNATIONAL LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 003 132 090
Second Defendant

ALFRED CHI WAI WONG
Third Defendant

DANNY KAM YUN AU-YEUNG
Fourth Defendant

SHAN PEI INVESTMENT LIMITED
Fifth Defendant

JUDGE:	EMMETT J
DATE OF ORDER:	2 NOVEMBER 2012
WHERE MADE:	SYDNEY

THE COURT:

1.ORDERS that the plaintiffs pay the costs of the defendants and of Gujarat NRE Minerals Limited (Gujarat) of the plaintiffs’ interlocutory application filed on 10 February 2012, as amended on that day.

2.ORDERS that the first and second defendants jointly and severally pay the costs of the plaintiffs, of the third and fourth defendants and of Gujarat of the first and second defendants’ interlocutory application filed on 23 March 2012, as amended on 26 March 2012 and as further amended on 21 May 2012.

3.ORDERS that each party who filed an amended pleading pay any costs of any other party thrown away by that amendment.

4.ORDERS that the first and second defendants pay the plaintiffs’ costs of the proceeding.

5.ORDERS that the third and fifth defendants pay the plaintiffs’ costs of the proceeding incurred after 23 July 2010.

6.ORDERS that the fourth defendant pay the plaintiffs’ costs of the proceeding incurred after 23 July 2010 and before 7 October 2010.

7.ORDERS that the plaintiffs pay the costs reasonably incurred by Gujarat in connection with the proceeding, including any interlocutory proceeding, other than the interlocutory proceeding referred to in Order 2;

8.ORDERS that the costs to be paid under Order 7 be treated as the plaintiffs’ costs of the proceeding for the purpose of Orders 4, 5 and 6.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 34 OF 2010

IN THE MATTER OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017

BETWEEN:

ANTHONY JOHN WARNER AND STEVEN KUGEL IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
First Plaintiffs

BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017
Second Plaintiff

AND:

KEN YUK KEE HUNG
First Defendant

AUSTCORP INTERNATIONAL LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 003 132 090
Second Defendant

ALFRED CHI WAI WONG
Third Defendant

DANNY KAM YUN AU-YEUNG
Fourth Defendant

SHAN PEI INVESTMENT LIMITED
Fifth Defendant

JUDGE:	EMMETT J
DATE:	2 NOVEMBER 2012
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. This proceeding is now finalised, except for questions of costs. The proceeding has had an unfortunate history.  It was commenced on 18 January 2010, when orders were made ex parte. The trial of the proceeding was originally fixed for an expedited hearing in mid-2010, but the hearing did not commence on the day originally appointed and eventually finished, after several interruptions, in April 2011, with final submissions received in June 2011. My conclusions, and the reasons for those conclusions, were published on 30 September 2011 (see [2011] FCA 1123). In these reasons, I shall use terms in the way they were defined in those reasons.

2. The proceeding was concerned with the beneficial ownership of convertible bonds issued to Bellpac by Gujarat.  Ken Hung claimed to have acquired beneficial ownership by a series of transactions involving Bellpac, Alfred Wong, Shan Pei and Austcorp, including the Impugned Transactions.  I concluded that Bellpac remains the beneficial owner of the convertible bonds in question. 

3. In my reasons of 30 September 2011, I raised a question as to whether or not the conclusions that I reached concerning the Impugned Transactions could affect the position of the holders of other convertible bonds (see [2011] FCA 1123 at [224] to [226]). The observations that I made gave rise to two further interlocutory applications made after the publication of my reasons. Those applications have now been disposed of. Accordingly, I directed the parties to make any further submissions that they wished to make on the question of the costs of those interlocutory applications, as well as of the proceeding itself. Some of the parties had already made written submissions and supplementary submissions were subsequently made by most parties. The parties requested that the questions of costs addressed by the submissions be resolved on the papers, without further oral hearing.

4. There is no reason to disturb costs orders already made.  Apart from the costs of the proceeding proper, it is also necessary to deal with the costs of relevant interlocutory applications.  Gujarat also seeks an order that the Liquidators and Bellpac pay its costs in relation to all steps taken by it in connection with the proceeding, including its costs of all of the interlocutory applications. 

   THE INTERLOCUTORY APPLICATIONS

5. There are three interlocutory applications that are relevant for the purposes of applications for costs that have now been made.  The first was an application to restrain registration of transfers to Ken Hung.  The second was an application to join additional defendants after the completion of the hearing.  The third was for dismissal of the proceeding for want of proper joinder of defendants.  I shall deal with them separately. 

   The Injunction Application

6. By interlocutory application filed on 18 January 2010, as amended on 24 June 2010, the Liquidators and Bellpac sought to restrain registration of transfers from Bellpac to Ken Hung of the convertible bonds in question (the Injunction Application).  Gujarat was joined as a respondent to the Injunction Application, although it was not joined as a defendant in the proceeding.  Orders were made ex parte restraining the registration of the transfers to Ken Hung.  By the amendment on 24 June 2010, the Liquidators and Bellpac also claimed an order restraining the registration of any transfer from Bellpac to any other person of the convertible bonds in question.  Orders in those terms were made on 25 June 2010.  Those orders have remained in place throughout the hearing.  The interlocutory orders made on the Injunction Application have now been dissolved.  They have now been superseded by the final orders made in the proceeding.

7. Gujarat asks for its costs of the Injunction Application.  It may be arguable that Gujarat should not have been joined as a party to the Injunction Application.  An injunction could have been granted against Ken Hung, restraining him from proceeding with his application for registration of the transfer.  That injunction would have operated in personam against Ken Hung.  Once Gujarat had been notified of the injunction, it would have been a contempt to participate in conduct restrained by the injunction.  On that basis, Gujarat need not have been involved in the interlocutory application. 

8. However, no complaint has been made about the joinder of Gujarat in the Injunction Application.  It has not been suggested by any party that the injunction granted at the commencement of the proceeding should not have been granted or that there was any impropriety in obtaining the injunction.  Indeed, considerable difficulty was experienced in locating Ken Hung for service of the initiating process and interlocutory application.  In the circumstances, it is appropriate to order that the Liquidators and Bellpac pay Gujarat’s costs of the Injunction Application.  However, those costs should be treated as part of the Liquidators’ and Bellpac’s costs of the proceeding. 

   The Joinder Application

9. By interlocutory process filed on 10 February 2012 and amended on the same day, the Liquidators and Bellpac sought an order that holders of other convertible bonds issued by Gujarat be joined as defendants in the proceeding (the Joinder Application).  The respondents to the Joinder Application included Gujarat and the holders of other convertible bonds.  None of the defendants was a party to the Joinder Application. 

10. By the Joinder Application, the Liquidators and Bellpac also sought orders restraining Gujarat from registering, allowing or permitting any dealings whatsoever with convertible bonds registered in the name of Mr Kwok.  On 10 February 2012, the Court made an order restraining Gujarat, up to and including 17 February 2012, from converting convertible bonds held by Mr Kwok into shares in Gujarat.  On 17 February 2012, that injunction was dissolved and Gujarat was excused from an undertaking to give notice of any application for transfer or conversion of convertible bonds.  Gujarat agreed that, in the event that the bonds held by Mr Kwok were converted into shares, Gujarat would retain the relevant share certificates and would not release the share certificates without first giving the Liquidators notice of its intention to do so. 

11. On 16 March 2012, the Liquidators and Bellpac indicated that they did not want to pursue the joinder of additional parties and I ordered that the Joinder Application be dismissed.  I ordered that the costs of the respondents to the Joinder Application be paid on the indemnity basis.  Ken Hung and Austcorp now ask for their costs of the Joinder Application on the indemnity basis. 

12. The question of the absence of holders of other convertible bonds, whose title may be impugned by my conclusion that the Impugned Transactions were ineffective, was not raised in the course of the trial.  The question was not adverted to by any of the parties to the proceeding prior to my raising the question in my reasons of 30 September 2011.  Rather, the Joinder Application was made after findings of fact had been made, including findings on credit.  It did not directly affect the convertible bonds that Austcorp and Ken Hung claimed had been transferred by Bellpac to Alfred Wong, by Alfred Wong to Austcorp and by Austcorp to Ken Hung. 

13. The proposed additional defendants required separate legal representation and it was necessary for those legal representatives to familiarise themselves with the nature of the principal proceeding and the claim for leave to amend.  Their costs would not have been insignificant.  Accordingly, they were given their costs on the indemnity basis.  On the other hand, all of the existing defendants in the proceeding must be taken to have been fully informed as to the nature of the proceeding and the reason for the application for leave to join additional defendants at such a late stage. 

14. While the application for joinder at such a late stage may have been misconceived, and could not have succeeded as against the non-parties without their consent, I am not persuaded that the circumstances justify an order that costs be paid on the indemnity basis.  The difficulty arose as much by reason of an oversight on the part of the defendants as on the part of the plaintiffs.  Therefore, the Liquidators and Bellpac should be ordered to pay the costs incurred by all of the defendants in connection with the Joinder Application, on the party and party basis.  The Liquidators and Bellpac should also pay Gujarat’s costs of the Joinder Application.  Those costs should not be treated as the Liquidators’ and Bellpac’s costs of the proceeding. 

    The Dismissal Application

15. On 16 March 2012, I also directed that any defendant who wished to bring an application seeking dismissal of the proceeding for want of proper joinder should file an appropriate interlocutory application no later than 26 March 2012.  On 23 March 2012, Ken Hung and Austcorp filed an interlocutory application claiming an order that the proceeding be dismissed for want of proper joinder.  An amended interlocutory application was filed on 26 March 2012 and a further amended interlocutory application was filed on 21 May 2012.  By the interlocutory application as amended (the Dismissal Application), Ken Hung and Austcorp sought, in addition to summary dismissal, leave to file an amended defence pleading that the proceeding was improperly constituted and defective for want of proper joinder of the holders of other convertible bonds. The Dismissal Application was itself dismissed on 6 August 2012, for reasons that I then gave (see [2012] FCA 819).

16. There is no reason why Ken Hung and Austcorp should not bear the costs of the Dismissal Application.  As I have said, they were as equally at fault as the Liquidators and Bellpac in failing to raise the absence of parties at an earlier stage in the proceeding.  It is appropriate that they be ordered to pay the costs of the Dismissal Application on the party and party basis. 

    THE COSTS OF THE PRINCIPAL PROCEEDING

17. I shall deal separately with costs as between the Liquidators and Bellpac, on the one hand, and each of Ken Hung and Austcorp, Alfred Wong and Shan Pei and Danny Au-Yeung, on the other.  I shall then deal with the costs of Gujarat. 

    Ken Hung and Austcorp

18. The Liquidators and Bellpac ask for an order that Ken Hung and Austcorp pay their costs of the proceeding.  Ken Hung and Austcorp say, however, that there should be no order as to the costs of the proceeding as between them, on the one hand, and the Liquidators and Bellpac, on the other.  Further, they seek an order that Alfred Wong pay their costs of the proceeding. 

19. The principal relief claimed by the Liquidators and Bellpac in the proceeding was a declaration that Bellpac remained the beneficial owner of the $2 million of convertible bonds in question, and an order restraining registration of any transfer of those convertible bonds to Ken Hung.  The basis for that claim for relief was that the convertible bonds were registered in the name of Bellpac and there had been no transaction involving Bellpac, whereby Ken Hung was entitled to have the convertible bonds transferred to him.  Ken Hung raised, by way of answer to that claim, the alleged transactions involving agreements between Bellpac and Shan Pei, Shan Pei and Alfred Wong, Alfred Wong and Austcorp and Austcorp and Ken Hung.  The Liquidators and Bellpac succeeded in their contentions that the alleged transactions involving Bellpac and Shan Pei and Shan Pei and Alfred Wong had not taken place. 

20. However, against the possibility that those transactions were effective, as contended for by Ken Hung and Austcorp, alternative cases were advanced on behalf of the Liquidators and Bellpac.  In the event, it was unnecessary to reach a firm conclusion in relation to the alternative cases advanced.  However, Austcorp and Ken Hung contend that it was unnecessary for Bellpac and the Liquidators to allege the alternative cases, based on the assumption that the Impugned Transactions were effective, and it was unnecessary therefore to join Alfred Wong, Danny Au-Yeung and Shan Pei as additional defendants. 

21. Bellpac and the Liquidators have been successful in the proceeding.  Ken Hung and Austcorp defended the proceeding by contending for the effectiveness of the Impugned Transactions.  That defence was unsuccessful.  The majority of the time taken in the proceeding and at the hearing concerned the effectiveness of the Impugned Transactions and the beneficial interest in the convertible bonds. 

22. While Bellpac and the Liquidators were not wholly successful in relation to certain of the alternative cases, that does not detract from the fact that, in essence, they have been wholly successful as against Ken Hung and Austcorp.  There is no reason to depart from the usual order that costs should follow the event.  In the circumstances, it is appropriate to order that Ken Hung and Austcorp pay the costs of the Liquidators and Bellpac of the proceeding. 

23. Austcorp also says that it was not a necessary party in the proceeding and therefore should not have been joined.  However, Ken Hung’s title to the convertible bonds in question was dependent upon Austcorp having acquired ownership from Alfred Wong.  Austcorp was a necessary party in relation to Ken Hung’s claim to entitlement to the convertible bonds.  It was not suggested at any stage in the conduct of the hearing that Austcorp should not have been joined.  Having been joined, Austcorp could have filed a submitting appearance.  It did not.  Rather, it filed a defence setting up the validity of the Impugned Transactions.  It was unsuccessful in doing so.  Austcorp should pay the costs of the proceeding of the Liquidators and Bellpac. 

24. The costs of the Liquidators and Bellpac of the Injunction Application, including the costs of Gujarat of the Injunction Application to be paid by the Liquidators and Bellpac, should be treated as part of the costs of the Liquidators and Bellpac to be paid by Ken Hung and Austcorp. 

25. Ken Hung and Austcorp also ask for an order that Alfred Wong and Danny Au-Yeung pay their costs of the proceeding.  They say that they were innocent parties to the Impugned Transfers and acted in good faith, without notice of any breach of directors’ duty or insolvency.  They will suffer harm as a consequence of the Impugned Transfers being found to be ineffective.  The source of that harm, they say, was the wrongful action of Alfred Wong and Danny Au-Yeung.

26. No findings made justify an order that Danny Au-Yeung pay the costs of Ken Hung and Austcorp.  It may be that Ken Hung and Austcorp have a claim against Alfred Wong based on a breach of an implied warranty of authority or title in relation to the convertible bonds in question.  Such a question has not been litigated in the proceeding.  There has been no cross-claim between the defendants.  It may be that the costs incurred by Ken Hung and Austcorp in defending the claims brought by the Liquidators and Bellpac are part of the loss suffered by reason of the breach of such implied warranties.  Nevertheless, I am not persuaded that it is appropriate that an order for payment of costs should be made in this proceeding.  To the extent that orders for the payment of the costs of the Liquidators and Bellpac will be made against Ken Hung and Austcorp, as well as against Alfred Wong and Danny Au-Yeung, rights of contribution may arise if any one of those parties paid more than his or its fair share of the costs awarded to the Liquidators and Bellpac.  That question, however, has not yet arisen. 

    Alfred Wong and Shan Pei

1. Alfred Wong and Shan Pei were joined as defendants on 23 July 2010, some six months after the commencement of the proceeding, following a number of interlocutory hearings and after all of the affidavit evidence in chief had been filed on behalf of the Liquidators and Bellpac, other than three affidavits that are of no consequence.  They did not file any affidavit evidence that addressed their alternative cases against Alfred Wong.  Rather, the conduct of the proceeding after the joinder of Alfred Wong, Danny Au-Yeung and Shan Pei was directed principally at Ken Hung and Austcorp, who were the only defendants who adduced evidence at the hearing.  While Alfred Wong did not actively participate in the proceeding, affidavits sworn by him before he was joined were filed by Ken Hung and Austcorp and were read in the proceeding on their behalf.  The Liquidators and Bellpac claim an order for costs against Alfred Wong and Shan Pei.  Alfred Wong contends that the Liquidators and Bellpac should pay his costs or, alternatively, that there should be no order as to costs between those parties.  Shan Pei made no submissions and played no part in the proceeding. 

2. The Liquidators and Bellpac claimed no relief against Alfred Wong or Shan Pei in their primary case and only sought relief against them in the event that the Court found that the Impugned Transactions were effective.  Alfred Wong and Shan Pei did not abandon the defence originally filed on their behalf, which supported the case of Ken Hung and Austcorp that the Impugned Transactions were effective.  It is because of that assertion that they were joined as parties.  It is appropriate that Alfred Wong and Shan Pei be ordered to pay the costs of the Liquidators and Bellpac from the time of their joinder as defendants in the proceeding. 

   Danny Au-Yeung

3. No damages were sought against Danny Au-Yeung.  Declarations were sought only in the event that the Court found that the Impugned Transactions actually occurred, contrary to the submissions made by Bellpac and the Liquidators.  The effect of the conclusion that the Impugned Transactions did not take place is that Danny Au-Yeung’s primary position in the proceeding was vindicated.  Danny Au-Yeung was not joined in the proceeding until 23 July 2010.  That was less than a month before the hearing commenced on 16 August 2010.  On 20 August 2010, I gave directions for the future conduct of the proceeding, taking into account the recent joinder of Danny Au-Yeung, Alfred Wong and Shan Pei.  While a joint defence of Danny Au-Yeung, Alfred Wong and Shan Pei had been filed on 3 August 2010, that defence was replaced by an amended defence of Danny Au-Yeung filed on 12 October 2010, a draft of which had been served several days earlier.  On 7 October 2010, four days prior to the recommencement of the hearing, Danny Au-Yeung served written submissions.  In the written submissions and in the amended defence, Danny Au-Yeung did not contest the allegations made by the Liquidators and Bellpac that Bellpac was beneficially entitled to the convertible notes in question.

4. In the course of addresses on 5 April 2011, counsel for Danny Au-Yeung did not contest the case advanced by the Liquidators and Bellpac in relation to the Impugned Transactions.  Danny Au-Yeung’s position was that the Impugned Transactions did not occur.  Further, no ultimate finding was made against Danny Au-Yeung.  While it was not necessary to determine the alternative case of breach of duty against Alfred Wong and Danny Au-Yeung, I indicated that, had the Impugned Transactions taken place, I would be disposed to conclude that they involved a breach of statutory and fiduciary duty on the part of Alfred Wong and Danny Au-Yeung.  While that finding may demonstrate that it was not improper or unreasonable for Danny Au-Yeung to be joined, it is not a justification for concluding that the Liquidators and Bellpac succeeded against Danny Au-Yeung. 

5. I did not conclude positively that Danny Au-Yeung was in breach of any fiduciary or statutory duty.  While, in the light of matters alleged by Ken Hung and Austcorp, the Liquidators and Bellpac may have needed to obtain declarations about the conduct of Danny Au-Yeung, it was clear, after written submissions on his behalf were served on 7 October 2010, that he did not contest the primary case made by the Liquidators and Bellpac. 

6. Danny Au-Yeung tendered no evidence contrary to the case advanced on behalf of the Liquidators and Bellpac.  Two affidavits were sworn by Danny Au-Yeung.  However, they were prepared by the solicitors acting for Ken Hung and Austcorp before Danny Au-Yeung was joined as a defendant.  They were not read by any party.  Had Danny Au-Yeung given evidence, he may or may not have supported the case advanced by Ken Hung and Austcorp.  That is entirely a matter of speculation. 

7. The Liquidators and Bellpac seek an order that Danny Au-Yeung pay their costs of the proceeding.  Danny Au-Yeung, on the other hand, seeks an order that Bellpac and the Liquidators pay his costs.  In all of the circumstances, I consider that it is appropriate that there be no order as to the costs as between Danny Au-Yeung and Bellpac and the Liquidators after 7 October 2010, when his submissions made clear that he did not contest the primary case made by the Liquidators and Bellpac.  He should be ordered to pay the costs of the Liquidators and Bellpac incurred after his joinder on 23 July 2010 up to 7 October 2010. 

   Gujarat

8. Gujarat seeks an order that the Liquidators and Bellpac pay its costs in relation to all steps taken by it in connection with the proceeding, including the following:

   ·obtaining advice prior to commencement of the proceeding regarding its contractual obligations in relation to the convertible bonds;

   ·liaising with the solicitors for the Liquidators and Bellpac concerning Ken Hung’s submission to it of transfers of convertible bonds registered in the name of Bellpac;

   ·appearing at, and attending as an observer of, directions hearings;

   ·negotiating with the solicitors for the Liquidators and Bellpac regarding the widening of the terms of the interim injunction because of a potential competing equitable claim to convertible bonds;

   ·obtaining and reading transcripts; and

   ·reading the reasons for judgment and liaising with the solicitors regarding the terms of proposed orders.

9. The issue of the convertible bonds by Gujarat constituted consideration for the settlement of certain disputes between Gujarat and Bellpac.  The terms of the convertible bonds included a term that they were freely transferrable.  Accordingly, Gujarat was under a contractual obligation to register a change of holder upon receipt of the relevant certificate and a form of transfer in respect of any convertible bonds.  Gujarat claims that, by reason of its cooperation, the Liquidators and Bellpac have had the benefit, during the course of the proceeding, of an interim injunction restraining it from registering the transfers of convertible bonds to Ken Hung.  But for the injunction, Gujarat would have been contractually obliged to register the transfers submitted by Ken Hung.  Gujarat says that it faced significant claims from Ken Hung and would have been liable for damages but for the injunction. 

10. Gujarat says that it cannot seek compensation from the defendants, in circumstances where it has not actively participated in the proceeding.  Therefore, it says, since Bellpac has been the recipient of substantial advantage, it is fair and just that Gujarat’s legal expenses in relation to the proceeding be met by Bellpac and the Liquidators. 

11. Gujarat is, in a sense, in the position of a stakeholder who has interpleaded.  Gujarat did not resist the granting of injunctions restraining the registration of transfers of convertible bonds to Ken Hung.  No one has suggested that Gujarat has acted improperly in relation to its dealing with the application by Ken Hung for registration of transfers of convertible bonds into his name. 

12. No final relief was claimed against Gujarat in the proceeding.  It may be that Gujarat had a commercial interest in the outcome of the proceeding and of various interlocutory applications made in the course of the proceeding.  While it was entitled to its costs of any interlocutory proceeding to which it was joined, I do not consider that any basis has been established for ordering that it be paid its costs of observing or taking an interest in the outcome of the proceeding, simply because it had a commercial interest in that outcome.  However, Gujarat was, of necessity, involved in the proceeding and it was not unreasonable for it to be represented at directions hearings and to take note of the outcome of the proceeding.  The Liquidators and Bellpac should be ordered to pay its reasonable costs of its involvement in the principal proceeding.  Those costs should also be treated as part of the Liquidators’ and Bellpac’s costs of the proceeding. 

13. Gujarat holds the original of the certificates, over which it says it could claim a lien for its costs and expenses.  Whether or not Gujarat has a lien over the certificate and transfers is not a matter that can be resolved without evidence on an application for costs.  I am not disposed at this stage to make any further order than the one that I have just indicated.  If Gujarat is entitled to a lien for its costs and expenses incurred in relation to the dispute, that substantive claim should be prosecuted in an appropriate proceeding. 

    CONCLUSION

14. I propose to make orders for costs as indicated.  In addition, there should be orders for costs thrown away by amendment of pleadings.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:  2 November 2012