//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2011] FCA 1174
Federal Court of Australia
2011-10-18
Gordon J
Original judgment source is linked above.
A INTRODUCTION 1 On 7 October 2011, reasons for decision were published in relation to an Interlocutory Process filed by the Receivers of the Reef House Scheme seeking directions: Australian Securities and Investments Commission v Letten (No 13) [2011] FCA 1151. The same terms are adopted in these reasons for decision. In general terms, declarations were made that the Receivers were justified in refusing to pay to Mirvac Hotels Pty Ltd (Mirvac) the sum of $542,040 (the Termination Fee), being the Termination Fee claimed by Mirvac under a Hotel Management Agreement dated 27 April 1998 (HMA) between the seventh defendant, Firbank Arch Pty Ltd (Firbank Arch), and Mirvac, as an expense of the receivership of Firbank Arch. 2 On the question of costs of the Interlocutory Process, the Receivers, Mirvac, Westpac Banking Corporation (Westpac) (as the Secured Lender) and the Australian Securities and Investments Commission (ASIC) were directed to file agreed orders, or file and serve submissions. They cannot agree. Each has filed submissions. In general terms, Mirvac submitted that its costs should be paid by the Receivers out of the fund held by them, or if that order is not made, that there should be no order for costs against Mirvac. The other participants sought an order that Mirvac pay their costs. The Receivers and Westpac sought their costs from Mirvac on an indemnity basis.
Costs order? 3 Where an application for directions in the course of a receivership or a winding up is complex, or involves a relatively novel proposition in law, the starting point is that the costs of a "proper contradictor" are paid out of the assets of the company: Farrow Finance Company Ltd (in liq) v ANZ Executors and Trustee Company Ltd (1997) 23 ACSR 521 at 527. 4 Mirvac submitted that it had acted as a "proper contradictor" to the Interlocutory Process, and there were no special circumstances which warranted deviation from that starting point. Indeed, Mirvac submitted that there was an additional reason why its costs should be paid out of the funds held by the Receivers - it had been "partly successful". 5 I reject Mirvac's submissions. First, Mirvac did not act as a "proper contradictor". It acted purely in its own self interest. Secondly, to the extent that Mirvac was "partly successful", those issues were resolved prior to the substantive hearing and were not considered by the Court. That left the issues in dispute between the Receivers and Mirvac which were the subject of directions. In relation to those matters, Mirvac was wholly unsuccessful. In the circumstances, it is appropriate that costs follow the event, as they would have if Mirvac had issued proceedings against the Receivers. 6 Westpac and ASIC also sought to have their costs of the Interlocutory Process paid by Mirvac. I accept those submissions. In my view, their participation in the hearing of the Interlocutory Process was necessary, objective and reasonable and, to the extent that it matters, responsive to issues raised by the Court and directly relevant to it.
Indemnity costs? 7 The next question was whether the Receivers' and/or Westpac's costs should be paid by Mirvac on an indemnity basis. 8 Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad discretion on the Court to award costs in proceedings. In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 152, Black CJ stated the principles applicable to a claim for indemnity costs: … it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the Court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless, the Court has an absolute and unfettered jurisdiction in awarding costs, although the discretion must be exercised judicially. So, indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court in exercising its discretion in that way. 9 The Receivers produced a letter dated 18 February 2011 (prior to the hearing) that they had sent to Mirvac stating that its claim was misconceived and inviting Mirvac to withdraw it. The Receivers submitted that Mirvac's failure to accept the Receivers' adjudication of its claim for priority costs in that letter caused the fund to incur the additional expense of bringing the Interlocutory Process including the costs associated with listing the matter for hearing, a mini-discovery exercise, preparation of an affidavit and submissions, the expense of briefing Counsel, the costs of attending the hearing of the Interlocutory Process and the costs associated with addressing Mirvac's belated argument regarding the Deed of Consent including, inter alia, preparation of additional submissions and attendance at a telephone directions hearing. 10 Westpac also sought an order for payment of its costs on an indemnity basis. Specifically, Westpac referred to the lateness with which Mirvac raised arguments concerning the Deed of Consent, which required Westpac to respond urgently, and that Mirvac's arguments failed in their entirety. 11 In the present case, I consider there were special or unusual features justifying the Court exercising its discretion to award indemnity costs. The Interlocutory Process raised real and substantial questions for determination but it would not have been necessary if Mirvac had accepted the Receivers' adjudication of its claim. Moreover, its claim failed, legally and factually. On balance, it is appropriate that the Receivers and Westpac's costs of the Interlocutory Process be paid on an indemnity basis, such costs to be taxed in default of agreement. ASIC did not seek an indemnity costs order. However, I consider that its costs should also be paid on an indemnity basis. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.
Australian Securities and Investments Commission
Letten
(1996) 72 FCR 151