Ausino International v Apex Sports [2006] NSWSC 1119 | Case summary

3883/05 AUSINO INTERNATIONAL PTY LTD v APEX SPORTS PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) & ORS JUDGMENT - Ex Tempore 1 HIS HONOUR: This is the hearing of an interlocutory process which, in broad terms, seeks the removal of two of the administrators of a Deed of Company Arrangement. It is brought in principal proceedings which seek termination of that Deed of Company Arrangement. It is brought against a background where the present administrators of the deed are proposing to call a meeting of creditors in the comparatively near future. 2 The factual background against which the case is brought is, very broadly, as follows. The Company that is the first defendant was one of a group of companies which was controlled by the fourth defendant, Mr Jack Barry. It was a distributor of sports goods. Its principal supplier was the plaintiff. It had come to owe a very large sum of money to the plaintiff, for which the plaintiff was suing it in proceedings in the Commercial Division. 3 On 3 March 2005 Mr Barry and his solicitor, Mr Parker, met with Mr Dean-Willcocks, and gave him a task. Mr Dean-Willcocks is an insolvency practitioner. It appears, on the evidence presently before me, that the task that Mr Dean-Willcocks was given was to provide an advice on likely recoveries to unsecured creditors, to provide advice on likely recoveries to the secured creditor of the group, the National Australia Bank, to prepare or settle a document analogous to a report as to affairs, and to be involved in some negotiations with the plaintiff about the debt of the plaintiff. 4 In putting it that way, I am not making final findings, and the task might, even on the present evidence, have been a little more extensive than that. 5 On 4 March 2005 the Commercial Division proceedings that I have mentioned came before Bergin J. Her Honour entered summary judgment in those proceedings for an amount of the order of $2.67 million. 6 On 14 March 2005 the plaintiff served a Statutory Demand on the Company, relating to that judgment debt. The Statutory Demand was not complied with, and on 29 April 2005 the plaintiff commenced winding up proceedings against the Company. 7 Mr Barry's wife, Mrs Lindy Barry, was the sole registered proprietor of a home at Mosman. On 17 May 2005 she transferred that property, for $3.7 million. On the evidence presently before me, it appears that from the purchase price, she discharged the indebtedness of the Apex Group of companies to the National Australia Bank, and took an assignment of the securities that the bank held over the assets of those companies. 8 On 20 May 2005 Mr Dean-Willcocks and his partner Mr Shepard - who are the second and third defendants in the present proceedings - were appointed as administrators of certain entities related to the Company, and on 23 May 2005 were appointed as administrators of the Company. 9 30 May 2005 was the return date of the winding up proceedings. The winding up proceedings were on that day adjourned, on the application of the voluntary administrators. 10 On 17 June 2005 a meeting of creditors resolved that the Company should enter into a Deed of Company Arrangement. That resolution is one which was passed on votes whereby there were 23 creditors, whose debts had been admitted for about $2.97 million in favour, and 5 creditors, whose debts had been admitted for about $3.26 million against. On the present evidence, it appears that many of the creditors voting in favour of the resolution were ones who were not personally present, and who had given their proxy to Mr Barry. Those creditors did not have the opportunity to hear various matters which the plaintiff wished to put forward in opposition to the deed. As well, many of the creditors who had given their proxies to Mr Barry were creditors for comparatively small sums of money, by comparison with the debt that was owed to the plaintiff. 11 When the voting showed that a majority by number of creditors were in favour of the deed, but a majority in value were opposed to it, the chairman of the meeting had a casting vote. The chairman, Mr Shepard, exercised that casting vote in favour of the deed being entered. The deed in question was executed the same day. 12 On 8 July 2005 these proceedings were commenced, seeking an order that the deed be terminated, or in the alternative declared to be void. 13 The plaintiff articulated its claims in a Statement of Claim, which was filed on 23 September 2005. The grounds relied on were, very broadly, that various statements in the report to creditors were inaccurate or inadequately based, and that for various reasons Mr Shepard should not have exercised his casting vote in favour of the deed. One of the reasons why the recommendations were alleged to be inadequately based was that there had been some real estate transactions, which had resulted in Mr and Mrs Barry between them ceasing to own several million dollars worth of real estate that they had owned a couple of years before the administrators were appointed. The plaintiff alleged that those real estate transactions had not been adequately investigated, or reported on to the creditors. As well, the plaintiff alleged there were various inter-company dealings, between the Company and other companies in the group of which it was a member, which had not been adequately investigated. The reasons why the plaintiff alleged Mr Shepard ought not have exercised his casting vote were broadly that the investigations were inadequate, and that the plaintiff, as by far the largest external creditor of the Company, would be severely prejudiced by the adoption of the deed. 14 The proceedings were set down, at a call over held on 15 March 2006, to be heard before Barrett J on 21, 22, 25 and 26 September 2006. 15 On 8 September 2006, three days after the plaintiff had changed its solicitors, the plaintiff notified the terms of a Notice of Motion that it wished to bring. The Notice of Motion sought leave to file an Amended Statement of Claim, and provided a draft of that Amended Statement of Claim. 16 Leave was granted for the amendments which were sought to be made, and on 12 September 2006 two new categories of allegation were added to the Amended Statement of Claim. One of them was that the creditors had been misinformed about the amount for which Mrs Barry was a secured creditor. The report to creditors had stated that she was a secured creditor for around $1.83 million, whereas the Amended Statement of Claim asserted that she was in fact a secured creditor for a much lower sum. The Amended Statement of Claim was not very explicit about what that lower sum was, but by 21 September 2006 it was conceded by counsel for the administrators that the sum ought have been around $600,000. That was not altogether common ground - the plaintiff contended she was a secured creditor for even less than $600,000 - but it was apparent that the difference between the amount that the creditors had been informed was the value of the amount secured, and the amount actually secured, was considerable. 17 Another new allegation made by the Amended Statement of Claim was that, by reason of their prior engagement, the administrators should not have accepted appointment as administrators, and should not have exercised the casting vote. The way that the Amended Statement of Claim put that allegation was as follows: "72A. As Voluntary Administrators of Apex Sports, Dean Willcocks and Shepard had implied duties of independence and impartiality in the discharge of their statutory responsibilities. 72B. Prior to accepting appointments as Voluntary Administrators of Apex Sports, Dean Willcocks and Shepard were engaged by Apex Sports on 3 March 2005 to attempt to settle the debt owed by Apex Sports to Ausino (the "prior engagement"). 72C. In the course of the prior engagement, Dean Willcocks and Shepard: 72C.1 met with and received instructions from Barry; 72C.2 advised Apex Sports in relation to the debt owed to Ausino; 72C.3 liaised with Ausino on behalf of Apex Sports; 72C.4 prepared a draft preliminary report concerning the financial affairs of Apex Sports; 72D. In acting for and in the interests of Apex Sports in connection with the prior engagement, Dean Willcocks and Shepard had, and a reasonable observer would perceive that Dean Willcocks and Shepard had: 72D.1 manifested a tendency to favour the interests of Apex Sports at the expense of Ausino; 72D.2 acted so as to detract from their ability to act independently and impartially in their subsequent appointment as Voluntary Administrators of Apex Sports. 72E. As a result of the prior engagement, Dean Willcocks and Shepard: 72E.1 should not have accepted appointments as Voluntary Administrators of Apex Sports; 72E.2 having accepted such appointments, should not have exercised the casting vote which resulted in the execution of the Deed of Company Arrangement." 18 Since then, the plaintiff has provided particulars of paragraph 72D, which say that paragraph 72D is an allegation of both actual and apprehended bias. 19 On 21 September 2006 the proceedings were before Barrett J for final hearing. Counsel for the plaintiff opened at some length, including detailing the work which Mr Dean-Willcocks had done pursuant to the retainer which began on 3 March 2005. Counsel for the first, second and third defendants then made an application for an adjournment. He accepted that there was a respect in which the initial report to creditors had been materially misleading, namely that Mrs Barry was a secured creditor for of the order of $1.8 million. The administrators proffered an undertaking to the court, in terms which were eventually formulated as: "1. Mr Shepard and Mr Dean-Willcocks undertake that on or before 20 November 2006 they will convene a meeting of creditors of the first defendant pursuant to section 445F of the Corporations Act and at that meeting will propose the following resolutions: (i) to confirm the deed of company arrangement; (ii) to terminate the deed of company arrangement; and (iii) to wind up the first defendant. 2. Mr Shepard and Mr Dean-Willcocks further undertake that they will provide to creditors, prior to that meeting, a report substantially in the form required by section 439A of the Corporations Act dealing, amongst other things, with: (i) Mrs Barry's secured debt; (ii) the effect of the deed of company arrangements in relation to other companies in the Apex group; (iii) the offer to fund made by the plaintiff today; (iv) the result of any further investigations regarding Mr Barry's financial position; and (v) the current financial position of the first defendant." 20 His Honour granted the adjournment, and gave detailed reasons for so doing - Ausino International Pty Ltd v Apex Sports Pty Ltd [2006] NSWSC 986. In those reasons his Honour expressly set out some of the bases upon which the plaintiff was, by then, attacking the deed: "3 In attacking the deed, the plaintiff relies on two main contentions or groups of contentions. First, the plaintiff says that the information creditors were given, for the purposes of and in the context of the meeting, was deficient, that is to say, affected by material omission and by material statements of a false and misleading kind. 4 Second, the plaintiff contends that, because of an advisory assignment one of the administrators had taken on for the first defendant before the advent of the Part 5.3A administration, there was bias or grounds for a reasonable apprehension of bias on the part of the administrators that disqualified them from acting generally and in particular should have caused the chairman of the creditors meeting to refrain from exercising the casting vote." 21 The purpose of the meeting was stated by his Honour, at [11], as follows: "The purpose of such a meeting of creditors would be to give them an opportunity to decide whether they wish to continue with the deed of company arrangement. They would be given that opportunity in the context of new and updated disclosure. This would cover not only the true picture regarding Mrs Barry's secured debt, but some other matters as well, being matters that have come to light or been clarified in the meantime. These include the effects of deeds of company arrangement subsequently executed by a number of associated companies which have had an effect on the state of the indebtedness between the first defendant and those companies; an undertaking that the plaintiff has today given to the court regarding provision by it of funding to pursue liquidator's claims in the event of a winding up of the first defendant; the fact that the moneys coming from outside the company to constitute part of the deed fund, about the availability of which there was some speculation at the time creditors voted on the deed proposal, are now in a solicitor's controlled moneys account; and, possibly, results of further enquiries about Mr Barry's position, which is something relevant to consideration of the possibility of recovery proceedings in any winding up. In relation to the last matter, there are apparent or possible unexplained gaps between his situation of real property ownership five or six years ago and the position of modest means reflected in the statutory declaration he gave to the second and third defendants." 22 The plaintiff opposed the adjournment, and in so doing specifically relied upon the allegations that it was making, that there was an apprehension of bias on the part of the administrators. His Honour's judgment specifically records: "15. … It was submitted on behalf of the plaintiff that a decision to adjourn would, as it were, set at nought the objections the plaintiff has raised other than those based on allegedly faulty disclosure. In particular, the grant of an adjournment would set at nought the important and serious question of the independence of the voluntary administrators at the time they accepted appointment and at the time of the preparation of their report and the exercise of the casting vote. It is wrong, in the plaintiff's submission, for that matter, as it were, to go by default. It is said that an adjournment could properly be granted only if that and the other matters raised by the plaintiff as grounds for attacking the deed of company arrangement were properly seen to be hopeless. 16. I do not accept that submission. Those claims are serious claims and the grant of an adjournment would in no way stifle them. They would remain alive for agitation in due course if an adjournment were granted and the matter of the future of the deed of company arrangement went back to the creditors and it was their decision that the deed should continue in force." 23 His Honour decided: "18. I have reached the conclusion that the court will be assisted by further expression of creditors' wishes obtained in the way foreshadowed. That expression of wishes may cause these proceedings no longer to be necessary. It may cause them to be confined to narrower issues. One thing it will not do, it seems, is to leave them in precisely their current configuration. Further attention to the matter by creditors, on the basis of the corrected and updated information that has been foreshadowed, can only be helpful in setting the ultimate course for these proceedings, if indeed they are to continue at all, in the light of the creditors' further decision. 19. It seems to me that if, on the basis of further information given to them or for any other reason, the creditors should, at the further meeting, see fit to terminate the deed of company arrangement, that outcome would not be different from the outcome sought by the plaintiff in these proceedings so far as the effect of the deed is concerned. That seems to follow from s. 445H which equates termination and avoidance under all or any of the methods provided for in Division 11, so far as the future effect of the deed is concerned." 24 His Honour also stated, "20. The plaintiff is not, to my mind, prejudiced by the adjournment, except to the extent of further delay in having its claims determined." 25 His Honour then adjourned the proceedings to 9.30am on 22 November 2006, before him. His Honour recognised that, as the plaintiff had opened its case, he was part-heard. 26 On 5 October 2006 the matter returned before Barrett J. An interlocutory process dated 29 September 2006 was filed in court that day. It is that interlocutory process that I am hearing today. The orders it sought, so far as relevant today, were: "1. that the administrators of the deed of company arrangement of the first defendant, namely Ronald John Dean-Willcocks and Adam Shepard of Star Dean-Willcocks, Chartered Accountants, be removed pursuant to section 449B(a) for an apprehended lack of independence and impartiality. 2. that Stephen James Parbery and Christopher Clarke Hill of PPB, Chartered Accountants, be appointed as the administrators of the deed of company arrangement of the first defendant pursuant to section 449B(b)." 27 The solicitor for the first, second and third defendants, Mr Rosenblatt, raised the question of whether the interlocutory process was itself an abuse of process, as an attempt to undermine the decision of Barrett J of 21 September 2006. His Honour granted leave to the plaintiff to file the interlocutory process and the affidavits on which it was based. He gave directions in connection with it, and directed that any application to contend that the interlocutory process was itself an abuse of process be made returnable before him on 2 November 2006. He noted that the plaintiff might possibly approach the expedition judge the next day. 28 On 6 October 2006 the Chief Judge, hearing the Expedition List, set down the interlocutory process for hearing before me. 29 The accountants who the plaintiff proposes should become the administrators proffer to the court undertakings which are in materially the same terms as those which the present administrators gave to Barrett J on 21 September 2006. 30 There is debate about whether the application before me is for orders that are final or interlocutory. The orders that are sought are not expressed to operate only until the hearing of the principal proceedings, or indeed until any particular time in the future. There will never be a final hearing on the question of whether the administrators ought be removed. However, as I mentioned in Re Jay-O-Bees Pty Limited (2004) 50 ACSR 565 at [64], sometimes interlocutory decisions decide an issue which will not be revisited in final proceedings. Mr Adam Bell SC, for the plaintiff, submits that the present orders are interlocutory, because they aim to provide Barrett J with better and more reliable evidence, for the purpose of the principal proceedings, about the wishes of the creditors, than would be obtained by the present administrators conducting the meeting. 31 I accept that the application is interlocutory, in the sense for which Mr Bell contends. But importantly for present purposes, the orders, if granted, would produce a final effect. 32 In the course of the hearing Mr Newlinds SC, for the first second and third defendants, made two different applications. One was to have the interlocutory process dismissed as an abuse of process. The basis of that application was, in broad terms, that it was tantamount to a canvassing of the decision which Barrett J had already given, to accept the undertaking of the present administrators to hold a meeting of creditors. 33 The other application was to file additional evidence in the present application, and for it to be adjourned. That application arose in this way. One topic that was explored in the cross-examination of Mr Dean-Willcocks was the circumstances in which a recommendation had been made to creditors to accept the deed, when the incomplete investigation that had been made up to the time of the report to creditors suggested that there might be grounds available for a recovery action against Mr Barry. The report had said, in substance, that there was reason to believe that even if any such action resulted in a judgment, Mr Barry would probably not have funds to meet it. Mr Newlinds made his application to read additional evidence, to deal with the matters that have been put to Mr Dean-Willcocks in cross-examination on that topic. The evidence he proposed to read was an affidavit of Mr Shepard, that had been filed for the purpose of the principal case, in which, Mr Newlinds told me, Mr Shepard explains why he had assumed for the purpose of his report that no money would be attainable from Mr Barry. 34 I deferred consideration of both Mr Newlinds' applications. At the close of evidence, I asked counsel for the plaintiff to address on the assumption that the scope of evidence would remain what it was at that stage. 35 The only task that the administrators now have to perform is to call the meeting of creditors that they have undertaken to call and, if the deed remains on foot, to make a distribution to the creditors. If the deed remains on foot any administrators of the deed (whether the present administrators or new ones I might appoint) will not make any distribution to the creditors until the principal proceedings have been either decided or abandoned. I mention abandonment because Mr Bell submitted to me that one possibility was that, if the creditors were in favour of continuing the deed, following a meeting conducted with unquestionable independence and propriety, the plaintiff might decide not to continue with the proceedings. If the plaintiff does not abandon the proceedings, there would likely be no distribution until the present proceedings were decided, for the fairly obvious reason that if the principal proceedings succeed no distribution should be made under the deed at all. Thus if the deed remains on foot the only question of significance which the present application will decide, until the principal proceedings have been heard, is who is to prepare the report which is to go to creditors before the meeting which Barrett J has said would be helpful to him, and who will chair that meeting. 36 The creditors could decide, at that meeting, to terminate the deed pursuant to section 445C. That result would arise only if the notice of meeting actually proposed a resolution to terminate the deed - see section 445C(b). The reader of this judgment will recall that the undertakings which the administrators have given included an undertaking that they would call a meeting to consider a resolution that the deed be terminated. If the creditors vote to terminate the deed, the present administrators would become the liquidators of the company, pursuant to section 446A. It is a matter for conjecture, at present, whether in that eventuality the plaintiff would contend that the circumstances it relies on for saying that the administrators are both actually biased, and have apparent bias are circumstances which should lead the court to remove the administrators from any position as liquidators. However if the plaintiff wished to take any such action, it would be free to do so, in the light of the circumstances as they then existed. 37 The proposed meeting is one which will take place under section 445F Corporations Act. The only person who can convene such a meeting under that section is the administrator of the deed and, pursuant to section 445F(4), it is the administrator of the deed who is to preside at the meeting. Thus, when Barrett J accepted the undertaking on 21 September he was aware that, implicit in accepting it, was the fact that it would be the deed administrator who would be presiding at the meeting. His Honour's reasons for judgment show that he specifically called to mind that it was alleged there was bias or grounds for a reasonable apprehension of bias on the part of the administrators that disqualified them from acting generally and in particular that should have caused the chairman of the creditors meeting to refrain from exercising the casting vote. 38 The allegations that are raised by the interlocutory process are ones that are factually closely tied to other allegations in the Amended Statement of Claim. If the present allegations had been contained in the Amended Statement of Claim, and an application for separate determination of the present issues had been made, in my view it is inevitable that it would have been refused, because of the closeness of the connection between those issues and the issues in the rest of the principal proceedings. Of course, an application for separate determination is an application for issues to be determined finally, while the issue now before me is an interlocutory one, but even so, if I were to decide the issue now that decision is one which would be for practical purposes the same as a final decision. 39 When Barrett J comes to determine the principal proceedings, his Honour will be faced with deciding what significance he should place, concerning the issues then before him, on Mr Shepard having exercised his casting vote in favour of the Deed of Company Arrangement. It is that issue in particular which is different to, but very closely related to, the issues that are now before me. I recognise that the principal proceedings, as presently structured, do not seek the removal of the administrators. However, they still rely upon the alleged bias of the administrators as a reason for saying that the decision to adopt the deed was vitiated. 40 Mr Bell correctly points out that the law concerning abuse of process by re-agitating, in an interlocutory application, a question concerning which an interlocutory decision has already been given is now decided by the majority judgment in Nominal Defendant v Manning (2000) 50 NSWLR 139. In accordance with the judgment of the majority (Heydon JA and Foster AJA) there is no rule of law that such re-agitation can occur only if there has been a change of circumstances, or if the second application rests on evidence which could not, with reasonable diligence, have been obtained for use in the first application. The application now before me was based on much more material than was deployed before Barrett J when argument about the adjournment occurred on 21 September 2006. However, all of that material was available on 21 September 2006. Indeed, it had formed the bases of the amendments which had been made on 12 September 2006. 41 Mr Bell rightly points out that this application is not a second application of the same nature as the adjournment application, but rather an application which arises, at least to some extent, out of the fact that the adjournment was granted. Even so, Mr Bell relied upon the germ of the present application before Barrett J, as a reason for opposing the adjournment, and his Honour did not regard it as sufficient grounds to refuse the adjournment, or to not accept the undertakings proffered by the present administrators. 42 In my view, it is not necessary to decide the present application on the basis of abuse of process. It is sufficient to say that, in my view, the evidence which the plaintiff has brought so far would, if not qualified by other evidence, lead to a conclusion that there was a serious question to be tried about whether the administrators were guilty of apprehended bias. 43 In saying that, I stress that the defendants have not so far put before me all the evidence which they would wish on that topic, and I recognise the possibility that additional evidence might alter the view which I have expressed on the basis of the plaintiff's evidence alone, and the very limited evidence which the defendants have so far put before me. 44 However, in my view, the balance of convenience does not favour the granting of the present application. 45 The present administrators have done some work towards preparation of a report which they undertook to the Court they would prepare. However, the accountants who the plaintiff proposes should be appointed as administrators have, as I have mentioned, proffered an undertaking to call a meeting in the same way as the present administrators have undertaken to do. 46 One of the accountants who the plaintiff proposes, Mr Christopher Hill, says that the time they would need to prepare a report, if appointed, would be the same sort of time that a newly appointed voluntary administrator requires to be able to prepare a report for a second meeting of creditors. He says, understandably, that the time by which a report would be ready would depend upon the date on which the Court made an order appointing them. 47 However, if the order were to be made today, he estimates that it would be possible (but only just) to convene a meeting of creditors for 20 November 2006. That belief is based on an assumption that he and his co-administrator will be able to take advantage of the work which the present administrators have completed in accordance with the undertaking they have given to the Court. It is not clear whether that assumption is well founded, but I shall assume, for the present purposes, that appointment of the new administrators would not cause a delay in the principal proceedings. 48 Even on that basis, in my view the balance of convenience favours refusal of the present application. Granting the present application would, in my view, seriously interfere with the proper conduct of the trial of the principal proceedings. I have already mentioned how the issues in the interlocutory proceedings are very closely related to the issues arising in the principal proceedings. For me to make what is, in practical terms, a final decision on them now would be likely to be a hindrance, or an embarrassment, to the independent determination of the principal proceedings. 49 I recognise that, in many interlocutory applications, the Court is able to make a decision on whether there is a serious question to be tried concerning the same issues as will be litigated in the principal proceedings, and that having adopted that course does not interfere with the proper running of the principal proceedings. However, in the present case, if I were to remove the present administrators on the ground of apprehended bias, that would cut across the decision of the principal proceedings in a way quite different to what happens in an ordinary interlocutory injunction application. 50 Further, I see no reason why his Honour Barrett J ought not be able to take into account any bias which he finds ultimately established in deciding what significance to place upon the resolution passed by the creditors at the forthcoming meeting of creditors, in just the same way as he will need to decide what significance to place upon the resolution passed by the creditors, by the statutory majority, to adopt the deed. By his decision on 21 September 2006, his Honour has already indicated that he sees no difficulty in that course either. 51 In these circumstances, the interlocutory application is refused. * * * * * * * * * * 52 The defendants make three separate applications concerning costs. The first is that they should be paid the costs of the present application. The second is that they should receive those costs on an indemnity basis, and the third is that there should be a special order that the costs be assessable and payable forthwith. 53 So far as the first application goes, Mr Bell submits that I ought reserve the costs, in a similar fashion to that in which Barrett J reserved the costs of the adjournment of the proceedings before him. In my view, there is a fundamental difference between the situation before his Honour on 21 September and the situation before me now. His Honour had before him a final hearing which was adjourned part heard. 54 The appropriate order for costs in those circumstances is one which I can readily understand would involve either reservation of the costs, or an order that the party applying for the adjournment pay the costs thrown away. In the particular circumstances of the case before his Honour, I can understand why he opted for the first alternative. 55 In contrast, the present proceedings before me are brought on the basis that they are an interlocutory process. The usual order which is made as to costs concerning interlocutory processes, is that if the plaintiff is the applicant, and succeeds, then the costs of the interlocutory process become the plaintiff's costs in the cause, while, if the plaintiff is the applicant, and loses, the usual order is that the plaintiff pay the defendant's costs of that application. 56 The rationale for that arises from the way that interlocutory proceedings are intended to advance the final hearing. If a plaintiff has a victory on the way to a final hearing, whether that victory is ultimately one which is fruitful will depend upon whether the plaintiff succeeds in the final hearing. However, if the plaintiff brings an interlocutory application and loses, then that interlocutory hearing is one which will, irretrievably, have cost the defendant money, and the justice of the situation is that the defendant should be indemnified for those costs, regardless of the outcome of the proceedings. 57 In my view, there is no reason to depart from the usual practice in the present case. 58 The basis upon which the defendants sought costs on an indemnity basis, was that the plaintiff's application was always doomed to failure, and that the repetition of the material relied upon in opposition to the adjournment on 21 September amounted to doubly vexing the defendants with the same question. 59 I am not persuaded that the application is one which was so devoid of prospects as to warrant a costs order on an indemnity basis. Further, the present application is one which put in fuller terms matters, the substance of which had previously been put before Barrett J. However those matters had been put when the question before his Honour was whether there should be a meeting of creditors at all, and when there was no live alternative of a meeting occurring but with different administrators. 60 I am not persuaded in all the circumstances that an order for costs on an indemnity basis is appropriate. 61 The defendants also seek that the costs be assessable and payable forthwith, partly because this is a discrete application, and partly because the deed fund which they hold is one which they hold for purposes other than payment of these costs. 62 It is a common enough situation for an administrator to be faced with litigation concerning the entry into of a Deed of Company Arrangement, or the matter of its operation. The terms of the deed are not before me in the present case, but it is by no means uncommon for the first charge on such a deed to be the proper costs of the administrator of conducting the administration. 63 I see no reason why the costs of the administrators in opposing this application were not proper costs of conducting the administration. It could not be right, in my view, that administrators, simply because they are administrators, are entitled to orders that any costs payable to them for interlocutory applications in litigation ought be payable forthwith, when that is not the usual principle that applies in litigation. 64 The principles upon which an order for payment of costs forthwith is not the usual order include that in the course of running litigation there can be costs orders going one way, and also costs orders going the other way, and also because the costs of ascertaining, individually, the costs of particular applications can themselves be greater than the combined costs of assessing all the costs of interlocutory applications in a set of proceedings. 65 I am not persuaded that it is appropriate to make an order for the costs to be assessable and payable forthwith in the present case. 66 In the result, I order that the plaintiff pay the costs of the first, second and third defendants of the present application. **********

Ausino International v Apex Sports

At a glance

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Judgment (9 paragraphs)

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Cases Cited (2)

Cited By (24)