ASIC v Edwards - Costs [2006] NSWSC 498 | Case summary

5254/03 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MALCOLM LESLIE EDWARDS - COSTS JUDGMENT 1 On 28 October 2005, declarations of contravention were made against the defendant under s.1317E of the Corporations Act 2001 (Cth). On 5 May 2006, an order was made under s.206C(1) disqualifying the defendant from managing corporations for the period of ten years commencing on and from 2 June 2006. Reasons for judgment were published on 24 August 2005 and 5 May 2006: see Australian Securities and Investments Commission v Edwards (2005) 220 ALR 148 and Australian Securities and Investments Commission v Edwards [2006] NSWSC 376. It remains to deal with the question of costs. 2 The plaintiff says, quite simply, that it was wholly successful in its claims, with the result that, under rule 42.1 of the Uniform Civil Procedure Rules 2005, the court should order that the defendant pay the plaintiff's costs, there being, in the particular circumstances, no alternative order that the court would be justified in making. 3 I observe at the outset that, although civil penalty proceedings are, in a broad conceptual sense, somewhat akin to criminal proceedings, there is no reason to think that the ordinary principles concerning costs in civil litigation should not be applied. In Re HIH Insurance Ltd; Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80, Santow J expressed a provisional opinion that costs should follow the event in the usual way but invited submissions on costs. In Australian Securities and Investments Commission v Plymin (No 2) (2003) 21 ACLC 1237, Mandie J said at [116]: "In my view, there is no discretionary reason why the usual order which is made in civil proceedings, namely that costs should follow the event, should not be made in this proceeding. I do not think that the fact that ASIC was exercising its statutory powers and responsibilities is a reason for denying to it a costs order."

The judgment upon the subsequent appeal in the Plymin case did not suggest that this approach was in any way inappropriate: see Elliott v Australian Securities and Investments Commission (2004) 10 VR 369. 4 The defendant says that the plaintiff should not have a costs order. His main contention is that there should be no order as to costs. The first point made in the outline of submissions filed on his behalf is as follows: "Any issue of culpability on the part of the defendant in respect to the findings of contravention is irrelevant to the court's discretion on costs. In this regard reference is made to the decision of Musolino v Sidiropolous (1991) 101 ALR 235 where the trustee in that case was found entirely at fault in respect of an error in adding the value of votes, though nevertheless there was no order as to costs made against the trustee." 5 Musolino v Sidiropolous (1991) 101 ALR 235 was an appeal from an order of a judge of the Federal Court dismissing an application for orders under the Bankruptcy Act 1966 (Cth) setting aside or terminating certain deeds of arrangement. After determining the substantive issue, Beaumont, Burchett and von Doussa JJ said in a joint judgment (at p.246): "Although we are of the view that the appeal should be dismissed, the appellants have had some success on certain of the points of law that arose. In these circumstances, we propose that there be no order for the costs of the appeal." 6 This ruling in relation to costs came after the court had considered what appear to have been at least nine separate submissions made by the appellants. As the court said, the appellants met with success in relation to some of their submissions. But their success was not sufficient to justify an order allowing their appeal. 7 Musolino v Sidiropolous is not, by any stretch of the imagination, a case in which someone found "entirely at fault" was spared the costs order that would have resulted from the application of the ordinary rule that costs follow the event. It is, rather, an example of the application of the principle that there may be a departure from the general rule where, in effect, the proceeding involves separately identifiable facets or issues and, while one party is successful in an overall sense, each enjoys success on some of the facets or issues. 8 That is not the case here. It is true that the plaintiff framed its insolvent trading case in various alternative ways, so far as incurring of the relevant debts was concerned. But it could not be said (and I do not really take the submissions to suggest) that this involved different facets or issues in the sense mentioned as being relevant to costs. 9 The second submission made on behalf of the defendant in support of the proposition that he should not be ordered to pay the plaintiff's costs is as follows: "The Court has acknowledged that the 10-year disqualification period imposed by it on the defendant will put an end to the defendant's commercial career. Imposing a costs order on the defendant in such circumstance takes the issue beyond protection of the public and specific and general deterrence as primary considerations in cases of this kind to retribution as a predominant factor. Costs orders are not made to punish the unsuccessful party: VBAS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 84 ALD 312." 10 VBAS v Minister for Immigration and Multicultural and Ethnic Affairs (2005) 84 ALD 312 is a decision of Crennan J in the Federal Court upon an appeal from the Federal Magistrate's Court where an application for review of a decision of the Refugee Review Tribunal had been dismissed. Crennan J dismissed the appeal but decided that there should be no order as to costs. The reason was, in essence, that there were conflicting decisions of Federal Magistrates on the relevant question, with the result that there was an element of uncertainty about the law. While her Honour did observe that "costs orders are not made to punish the unsuccessful party", she said nothing that would otherwise support the defendant's second submission - which is, in essence, that the making of a costs order against someone who has suffered financial prejudice as a result of the proceedings entails some form of unacceptable retribution. I do not consider that suggestion to be valid. 11 The third matter raised in the submissions made on behalf of the defendant is that the court's disqualification order will have a significant impact on the defendant's earning capacity and that this, coupled with his lack of means, warrants a departure from the general rule that costs should follow the event. No authority is cited in support of the proposition that these matters are relevant to displacement of the general rule. Indeed, judicial observations are to the contrary. I quote again from the judgment of Mandie J in Australian Securities and Investments Commission v Plymin (No 2) (above) at [116]: "Even assuming that either of the first and second defendants has demonstrated an incapacity to meet any substantial order for costs, I do not regard that of itself as a reason to deny to ASIC such an order." 12 The defendant's contention that the successful plaintiff should be deprived of costs could, as a general matter, be supported only if the plaintiff had, in relation to the proceedings, misconducted itself: see, for example, Ritter v Godfrey [1920] 2 KB 47. The defendant does not point to any such matter of misconduct. 13 The defendant's final submission is that, if the court's view is that a costs order against him is appropriate, then the costs should be reduced "by 50% to 70%". No specific reason is given, but I infer that each of the grounds put forward in support of the proposition that the defendant should not be required to pay the plaintiff's costs is asserted also on the question of reduction. 14 I am firmly of the opinion that none of the matters raised by the defendant would either justify a departure from the general rule that costs should follow the event or warrant some reduction of the defendant's liability for costs. The proceedings were regularly and responsibly commenced and conducted by the plaintiff, just as they were regularly and responsibly defended by the defendant. I do not regard either party as having engaged in misconduct in relation to the proceedings that would call for any special outcome on costs. Nor is there any other special or distinguishing feature. 15 I order that the defendant pay the plaintiff's costs of the proceedings as agreed or assessed on the party/party basis. **********

ASIC v Edwards - Costs

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