Bovis Lend Lease v Wily

CITATION : Bovis Lend Lease v Wily [2003] NSWSC 884 HEARING DATE(S) : 1, 8 July 2003 (and subsequent written submissions) JUDGMENT DATE : 30 September 2003 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : See under heading "Conclusions"

CATCHWORDS : CORPORATIONS - voluntary administration and winding up - costs orders against deed administrator after termination of deed -whether orders should be limited to assets of company - whether deed administrator entitled to be indemnified for costs -whether deed administrator should be required to pay costs personally LEGISLATION CITED : Corporations Act 2001 (Cth), ss 443D, 445D, 556, 1322 Adsett v Berlouis (1992) 37 FCR 201 Cresvale Far East Ltd v Cresvale Securities Ltd (No 2) (2001) 39 ACSR 62 Deputy Commissioner of Taxation v Portinex Pty Ltd (No 2) (2000) 34 ACSR 422 CASES CITED : Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157 Kirwan v Cresvale Far East Ltd (in liq) (2002) 44 ACSR 21 Re Biposo Pty Ltd; Condon v Rogers (No 3) (1995) 17 ACSR 730 Re NRMA Insurance (No.1) Limited (2000) 33 ACSR 595 Sanderson v Blyth Theatre Co [1903] 2 KB 533 6062/01 Bovis Lend Lease Pty Ltd (P) Andrew Wily (D1) Thomas Javorsky (D2)

1309/02 Bovis Lend Lease Pty Ltd (P, XD) Thomas Javorsky (D1, XC1) Interline Interior Linings Pty Ltd (in liquidation) (administrator appointed) (D2) PARTIES : Interline Interior Linings (NSW) Pty Ltd (D3) Andrew Wily (D4) Tui Turipa Ullrich Gilbert (D5) David Anthony Hurst (D6, XC2)

1088/01 HIH Workers Compensation Pty Ltd (P) Interline Interior Linings Pty Ltd (in liquidation) (administrator appointed) (D/R) Tui Gilbert (A1) Tui Gilbert Holdings Pty Ltd (A2)

FILE NUMBER(S) : SC 6062/01, 1309/02, 1088/01 P M Wood (P) 6062/01, (P, XD) 1309/02 COUNSEL : D J Durston (D1) 6062/01, (D2, D4) 1309/02, (R) 1088/01 T D Castle (D2) 6062/01, (D1, XC1) 1309/02, (D6, XC2) 1309/02 J T Johnson (D3, D5) 1309/02, (A1, A2) 1088/01 Freehills (P) 6062/01, (P, XD) 1309/02 SOLICITORS : P W Turk & Associates (D1) 6062/01, (D2, D4) 1309/02, (R) 1088/01 Blake Dawson Waldron (D2) 6062/01, (D1, XC1) 1309/02, (D6, XC2) 1309/02 Cutler Hughes & Harris (D3, D5) 1309/02, (A1, A2) 1088/01

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

6062/01 BOVIS LEND LEASE PTY LTD V ANDREW WILY & ANOR 1309/02 BOVIS LEND LEASE PTY LTD V THOMAS JAVORSKY & 6 ORS 1088/01 HIH WORKERS COMPENSATION PTY LTD V INTERLINE INTERIOR LININGS PTY LTD (IN LIQUIDATION) (ADMINISTRATOR APPOINTED) JUDGMENT 1 HIS HONOUR: This judgment relates to costs, in lengthy and complex proceedings to challenge the validity of a process of voluntary administration and deed administration of a company. 2 On 17 June 2003 I published my reasons for judgment in three proceedings, which had been heard together. They relate to a company called Interline Interior Linings Pty Ltd ("the Company"), the sole director and indirectly the owner of which is Tui Gilbert. Andrew Wily was appointed liquidator of the Company, and then he purported as liquidator to appoint Thomas Javorsky as the administrator of the Company. Subsequently the creditors of the Company purportedly resolved that the company should execute a deed of company arrangement. 3 In proceeding No 6062 of 2001, Bovis Lend lease Pty Ltd ("Bovis") applied to set aside Mr Wily's purported appointment of Mr Javorsky as voluntary administrator, essentially by way of appeal against Mr Wily's decision as liquidator under s 1321 of the Corporations Act. The defendants were Mr Wily and Mr Javorsky. I held that Mr Wily had made a valid decision to appoint Mr Javorsky, in difficult circumstances and with limited information, after consulting creditors at a meeting. I dismissed the proceeding. 4 In proceeding No 1309 of 2002, Bovis applied under s 445D and various other provisions of the Corporations Act for the purpose of challenging the validity of the second meeting of creditors of the Company in voluntary administration, at which the creditors resolved that the Company execute a deed of company arrangement under which an action for damages would be brought against Bovis. Bovis sought orders terminating the deed of company arrangement so that the company would be returned to liquidation, and to challenge two decisions at the second creditors' meeting to admit it to vote for only $1 and to admit Interline Interior Linings (NSW) Pty Ltd ("Interline (NSW)"), a related creditor, to vote for a substantial amount. Bovis also sought to remove Mr Javorsky as administrator, and to review Mr Javorsky's administration. The defendants in that proceeding were Mr Javorsky, the Company, Interline (NSW), Mr Wily, Mr Gilbert and Mr Hurst (a senior manager employed by Mr Javorsky's firm, who chaired the meeting). Mr Javorsky and Mr Hurst made a cross-claim seeking declarations of validity or curative orders. 5 I found that the Deed proposal put before the creditors was contrary to the interests of the creditors as a whole, because it gave Mr Gilbert and Interline (NSW) the option to choose not to provide funding to pursue the claim against Bovis; there was insufficient information for the creditors to assess the ability of Mr Gilbert and Interline (NSW) to fund litigation; Mr Gilbert had in any case a statutory obligation to assist the liquidator; and the deed effectively prevented further investigations into recoveries by the Company and deprived the creditors of the prospect of benefiting from such recoveries. I held that there were material omissions from Mr Javorsky's report to creditors because it gave creditors inadequate information about the claim against Bovis and the ability of Mr Gilbert and Interline (NSW) to fund the litigation; and failed to disclose a connection between Mr Franklin (a consultant to Mr Javorsky's firm) and Mr Gilbert (including Mr Franklin's role in the preparation of Mr Gilbert's report as to affairs) and also did not disclose the arrangement between Mr Javorsky and Mr Gilbert for the payment of Mr Javorsky's fees. 6 I found that Mr Javorsky failed to discharge his statutory obligation personally to chair the second meeting of creditors, but that orders should be made to overcome that contravention under s 1322. I held that the decision to admit Interline (NSW)'s claim for the full amount was correct, and that while the decision to admit the Bovis claim for only $1 was invalid this did not vitiate the creditors' decision. 7 Nevertheless I held that the creditors' resolution to execute the proposed Deed should be set aside under s 600A because it would not have been passed but for the related creditor vote of Interline (NSW), and it was contrary to the interests of the creditors of the company as a whole, and was unreasonably prejudicial to the interests of creditors who voted against it, for the purposes of that section. 8 I also held that the deed of company arrangement should be terminated under s 445D because it was contrary to the interests of creditors of the company as a whole, and effect could not be given to it without injustice, and also because of material omissions from Mr Javorsky's report, and for "other reasons" (relating to failure by Mr Javorsky to undertake sufficient investigations into the claim against Bovis, and Mr Franklin's connection with Mr Gilbert). 9 I held that Mr Javorsky should be removed from office because Mr Franklin's connection with Mr Gilbert, as well as Mr Javorsky's arrangement with Mr Gilbert for payment of fees, would cause a reasonable observer to perceive that Mr Javorsky lacked independence and impartiality, but I found that Mr Javorsky's remuneration should not be reduced. 10 These conclusions produced the consequence that the company would be returned to liquidation, with Mr Wily as liquidator. I expressed the opinion that, although I had made no adverse findings against Mr Wily, it may be desirable in all the circumstances for a new liquidator to be appointed who had had no prior dealings with the parties. However, when the matter returned to me for the purpose of making orders, Mr Wily expressed the desire to continue as liquidator and there was no opposition to that course by any of the other parties. Indeed, it was put to me that it was desirable for Mr Wily to continue because of his knowledge of the affairs of the Company. I acceded to these submissions with the result that Mr Wily remained as liquidator. 11 In proceeding No 1088 of 2001, the proceeding for the winding up of the Company, a winding up order had been made on insolvency grounds and Mr Wily had been appointed liquidator. Mr Gilbert and Gilbert Holdings Pty Ltd filed an interlocutory application in that proceeding, seeking a declaration that the winding up had been terminated on Mr Javorsky's appointment as administrator, or upon the creditors resolving that the Company execute a deed of company arrangement, or upon the execution of the Deed. In the alternative, they sought an order under s 482 terminating or staying indefinitely the winding up order. I held that the winding up had not been, and should not be, terminated. Costs in proceeding No 6062 of 2001 12 Bovis submits that my orders should be: (a) that the costs of Bovis, Mr Wily and Mr Javorsky be costs in the liquidation of the Company; and (b) that otherwise there be no order as to costs. 13 Mr Wily and Mr Javorsky contend that, as the defendants were successful in this proceeding, Bovis should be ordered to pay their costs. 14 In support of its submission, Bovis claims that I found one of the grounds of the appeal against Mr Wily's decision to be correct. At paragraph 234 I agreed with the submission by Bovis that it was to the greater advantage of creditors that the Company remain in liquidation, than that the deed of company arrangement proposed by Mr Gilbert be entered into after a process of voluntary administration. I held, however, that it was not necessary or appropriate to reverse Mr Wily's decision in order to return the Company to liquidation, because that result would be reached by another route (namely, termination of the deed of company arrangement under s 445D). Bovis says that this amounts to a finding that, if it had not succeeded in proceeding No 1309 of 2002, it would have succeeded in obtaining the relief sought in proceeding No 6062 of 2001. 15 In my opinion the submission by Bovis misreads paragraph 234 of my judgment. The point I made in that paragraph was that, looking at the matter at the time of writing the judgment, it was better for the creditors that the company should be in liquidation than that it be administered under the deed of company arrangement. I did not find that such a conclusion was appropriate to be drawn at the time when Mr Wily made his decision, or that he should have drawn that conclusion. The reasons I gave for my view included reference to the particular terms of the Deed, which were not available at the time when Mr Wily made his decision. My reasons also included reference to the absence of information about important issues such as the ability of Mr Gilbert and Interline (NSW) to fund the Bovis proceedings. That, again, was not a deficiency known at the time Mr Wily made his decision. Indeed, I said in paragraph 234 that Mr Wily might reasonably have expected the provision of that information to be addressed during the voluntary administration. 16 Consequently it is wrong to regard my remarks in paragraph 234 as acceptance of a ground for reversing Mr Wily's decision on appeal. It is therefore incorrect to say that if I had not reached the conclusion that the Company should be returned to liquidation by virtue of the setting aside of the Deed, the appeal against Mr Wily's decision would have succeeded on this ground. 17 In proceeding No 6062 of 2001 Bovis also sought relief under s 447C, which applies where there is "doubt, on a specific ground" about whether a purported appointment of a person as administrator of a company is valid. In my opinion, nothing in paragraph 234 of my judgment provides a basis for contending that any such doubt has arisen. 18 Bovis draws attention to rule 14.1(2)(a) of the Corporations Rules, and says that it was necessary for it to commence a proceeding under s 1321 within 21 days of Mr Wily's decision. Bovis says it was prudent and reasonable for it to pursue that proceeding notwithstanding the subsequent commencement of proceeding No 1309 of 2002. It also says that Mr Javorsky was a proper and necessary party as his position as administrator was directly affected by the relief sought. It is unnecessary for me to express any view on these matters. Assuming it was prudent and reasonable for Bovis to continue with its proceeding to challenge Mr Wily's decision, after commencing a proceeding to challenge the deed, the important fact is that it was unsuccessful, and in my opinion costs should follow the event. There is no justification for an order that Bovis, having unsuccessfully challenged Mr Wily's decision, should recover the costs of its failed proceeding out of the assets of the company. 19 Quite properly Mr Javorsky played only a limited role in proceeding No 6062 of 2001, making no submissions and filing no evidence. Nevertheless, he should have the benefit of a costs order, for such costs as he incurred in this proceeding. Costs in proceeding No 1309 of 2002 20 Bovis submits that I should make the following orders: (a) that Mr Javorsky, the Company, Interline (NSW) and Mr Gilbert (the first, second, third and fifth defendants respectively) pay the costs of Bovis (excluding the costs of the cross-claim); (b) that Mr Javorsky, the Company, Interline (NSW) and Mr Gilbert pay Mr Wily's costs (as fourth defendant) of the proceeding (excluding the costs of the cross-claim); (c) that Mr Javorsky pay the costs of Bovis of the cross-claim; (d) that with respect to the orders in (a) and (b) above, insofar as the Company is concerned, the costs of Bovis and Mr Wily be costs in liquidation of the Company; (e) that with respect to the orders in (a), (b) and (c) above, insofar as Mr Javorsky is concerned, he pay the costs of Bovis and Mr Wily personally; (f) that Mr Javorsky pay his own and the Company's costs of the proceeding and those costs are not to be payable from the assets or funds of the Company on any basis; (g) that the sixth defendant, Mr Hurst, pay his own costs of the proceeding personally and that those costs are not to be payable from the assets or funds of the Company on any basis; (h) that otherwise there be no orders as to Mr Hurst's costs of the proceeding. 21 As to proposed order (a), Bovis succeeded in obtaining orders invalidating the creditors' resolution that the Company execute a deed of company arrangement, terminating the Deed, and removing Mr Javorsky. It succeeded in these respects notwithstanding strenuous resistance by Mr Javorsky, the Company, Interline (NSW) and Mr Gilbert. 22 Counsel for Mr Gilbert and Interline (NSW) submitted that the principal findings in this proceeding were not against his clients, and that costs orders should be confined to the Company and Mr Javorsky. While it is true that the principal relief did not directly affect Mr Gilbert, my view is that to exclude him and Interline (NSW) from the costs orders would be to distort the outcome of the proceeding. Mr Gilbert was the "sponsor" of the Deed proposal and a fierce protagonist of it at the hearing. Interline (NSW) was in the same position. They should be required, along with the Company and Mr Javorsky, to pay Bovis' costs. 23 It is true that Bovis' success was not unqualified. It contended that the creditors' meeting was invalidated by the fact that Mr Javorsky failed to chair it personally, contrary to s 439B, and that there was no proper basis for a validating order under s 1322. Bovis succeeded in establishing that Mr Javorsky had not complied with s 439B, but I decided contrary to its submissions that I should make an order under s 1322. Bovis also attacked the validity of the creditors' meeting on the grounds that its claim was wrongly admitted at only $1, and the claim by Interline (NSW) was wrongly admitted for its full amount. I found that Bovis was right with respect to the administrator's decision to admit its claim for $1, but wrong with respect to its challenge to the administrator's decision to admit the Interline (NSW) claim for the full amount. I also found that the administrator's incorrect decision with respect of the Bovis claim did not invalidate the creditors' decision. 24 Nevertheless, in my view costs should follow the event, and therefore proposed order (a) is correct. The orders for invalidation of the creditors' resolution, termination of the Deed, and removal of Mr Javorsky were the principal relief sought in the Amended Originating Process (prayers 7, 3 and 4 respectively). By obtaining these orders, Bovis succeeded in its practical objective of taking the Company out of the Deed of Company Arrangement and the control of Mr Gilbert and placing it under the control of independent liquidator. Because of the overall success of Bovis, this is not an appropriate case for some apportionment of the costs of the hearing. 25 My finding that Mr Javorsky's appointment should be terminated was based on the perception created by Mr Franklin having an "crossed the line" by acting on behalf of or in the interests of the director prior to the commencement of the administration, and by then working for Mr Javorsky during the administration (Judgment, paragraph [363]). I did not make any finding of personal dishonesty or overall lack of conscientiousness on the part of Mr Javorsky (paragraph [373]). That is significant in certain other respects, as I shall explain. But it does not warrant my depriving Bovis of an order for costs against Mr Javorsky. Indeed, for Mr Javorsky conceded in submissions that the correct order was that Mr Javorsky as well as the Company and Mr Gilbert should pay Bovis' costs of the Amended Originating Process. 26 As to proposed order (b), Mr Javorsky submitted that Mr Wily was not a necessary and proper party because his role in relation to the company ceased upon his appointment of Mr Javorsky and none of the relief sought affected him. In my opinion that is incorrect. Mr Wily was a proper party to proceeding, though arguably not a necessary party, because the relief sought would produce the consequence that the Company was returned to liquidation under the control of Mr Wily as liquidator. Mr Wily adopted, quite properly, a neutral role and made no submissions in proceeding No 1309 of 2002. This is an appropriate case for the application of the principle in Sanderson v Blyth Theatre Co [1903] 2 KB 533, that in the circumstances Mr Wily's costs should be paid by the unsuccessful parties (Mr Javorsky, the Company, Interline (NSW) and Mr Gilbert) rather than by the successful plaintiff. 27 As to proposed order (c), the cross-claim by Mr Javorsky and Mr Hurst sought relief in respect of three matters, namely Mr Javorsky's failure personally to chair the second meeting of creditors, any deficiency in the decisions with respect to admission of claims for voting purposes, and any deficiency in his report to creditors. 28 As to the first matter, I held (contrary to Mr Javorsky submissions) that his personal attendance was required by s 439B of the Corporations Act, but (contrary to the submissions of Bovis) I made an order under s 1322(4)(a) declaring that the second meeting of creditors was not invalid by reason of any contravention of that section. 29 Bovis now submits that Mr Javorsky's success on this issue was in the nature of an indulgence of the Court consequent upon a contravention of the Act, and that the party seeking such an indulgence should pay the costs of obtaining it, on orthodox principles (citing Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157, 161). I do not regard the application of s 1322(4) as necessarily constituting an indulgence given by the Court to a party who has contravened the Act. Section 1322(4) is, as Owen J said in the Elderslie Finance case, a remedial provision. It enables the Court to make a curative order only if it is satisfied of the ingredients of s 1322(6), which direct attention, inter alia, to whether it is just and equitable that the order be made, and whether any substantial injustice has been or is likely to be caused to any party. The central issue is not whether to grant some form of dispensation to a contravening party, but whether to make an order which is in all the circumstances just and equitable. Circumstances may arise where the person seeking to invoke the section should pay the costs of the application - for example, in the Elderslie Finance case the Commission did not oppose the application and had declined to use its own power of exemption only because it took the view that it could not grant an exemption retrospectively. In other cases, such as Deputy Commissioner of Taxation v Portinex Pty Ltd (No 2) (2000) 34 ACSR 422 at [7], it is appropriate that costs of a successful application to invoke s 1322(4) should follow the event. There is an intermediate position, of course, which is that no order be made for costs of the application, with the intention that each party bear their own costs. 30 In the present case it is relevant that I found that Mr Javorsky failed to comply with the statutory requirement of s 439B. However, I found that Mr Javorsky's conduct was honest (Judgment, paragraph [258]) and that his failure was based upon a bona fide misreading of the Corporations Act and Regulations, the drafting of which had left it open for a reasonable person in his shoes to form the erroneous view that he was authorised to appoint a nominee to chair the meeting (Judgment, paragraph [259]). As counsel for Mr Javorsky pointed out, insofar as Bovis was successful in its claim under s 439B, it will receive its costs as part of the order for costs on the Amended Originating Process. 31 Weighing up these various considerations, I think it would be wrong to order Bovis to pay Mr Javorsky's costs of an issue legitimately raised by Bovis although ultimately dealt with by curative order, and it would be equally wrong to require Mr Javorsky to pay the costs of Bovis with respect to this matter, when Mr Javorsky succeeded in obtaining a curative order notwithstanding the opposition of Bovis. The right outcome is that there be no order for costs in respect of this matter. 32 As regards the admission of claims for voting purposes, Mr Javorsky succeeded in defending the adjudication of the Interline (NSW) proof of debt (Judgment, paragraph [282]). I found against Bovis on each of the four substantive arguments it advanced against the determination. I held that the adjudication of the Bovis claim at $1 would have been a reasonable assessment but for the matter of independence (Judgment, paragraph [295]). But Mr Franklin's conduct on Mr Gilbert's behalf created a very strong perception in the eye of a reasonable observer that the decision to reduce the Bovis claim to $1 was biased in favour of Mr Gilbert and against Bovis. Therefore the decision on the Bovis claim was vitiated by the failure of Mr Javorsky and Mr Hurst to discharge the duty of independence and impartiality of the chairman of the meeting of creditors (Judgment, paragraph [297]). Nevertheless the creditors' resolution to execute the deed of company arrangement was not invalidated by the incorrect determination regarding the Bovis claim (Judgment, paragraph [298]). 33 Bovis contends that the outcome regarding the admission of claims for voting purposes is neutral as a factor relevant to costs, because each side had partial success. Mr Javorsky submits that my findings supported the decision to admit the Bovis claim for $1, except on the independence issue, and that it would be unjust to deny Mr Javorsky his costs on the cross-claim in respect of the proof of debt, given the Bovis will receive its costs on the Amended Originating Process, which will cover the independence issue. On balance, I agree with Bovis that the outcome with respect to costs of this matter is neutral. It would be wrong to treat Mr Javorsky as having a victory, in any sense, with respect to the Bovis claim, because the decision was infected by Mr Franklin's lack of independence. 34 As to the third matter, I found that there were material omissions from Mr Javorsky's report to creditors. The report failed to provide adequate information to creditors on the financial ability of Mr Gilbert and Interline (NSW) to fund the Bovis litigation (Judgment, paragraph [333]), and gave almost no information about the nature of and basis for the claim against Bovis and its prospects of success (Judgment, paragraphs [334]-[336]), and failed to disclose the connection between Mr Franklin and Mr Gilbert (Judgment, paragraph [345]), and failed to disclose the arrangement with Mr Gilbert for payment of fees (Judgment, paragraph [350]). I decided that those deficiencies satisfied s 445D(1)(c) and therefore provided a basis for terminating the deed of company arrangement (Judgment, paragraph [353]). Since the circumstances warranted termination of the deed, it was unnecessary to determine whether there had been a contravention of s 439(4), and consequently unnecessary to deal with the cross-claim which sought to invoke s 447A consequently upon such contravention. 35 Bovis contends that my decision on the deficiencies of Mr Javorsky's report militates strongly in favour of a costs order against Mr Javorsky on the cross-claim. Mr Javorsky contends that his failure to defend his report is a matter already taken into account in the costs order on the Amended Originating Process, and the fact that no relief was granted to him in respect of the report is at best a neutral factor in any decision toward costs of the cross-claim. In my opinion Mr Javorsky's submissions are substantially correct. The relief sought in the cross-claim with respect to the report was strictly not reached in my reasons for judgment, because I decided on the merits that the case for terminating the deed under s 445D was overwhelming, and therefore the question of contravention of s 439A(4) and the potential application of s 447A did not need to be addressed. Therefore, while Mr Javorsky should not receive his costs on this aspect of the cross-claim because of his failure to defend his report, he should not suffer a costs order in addition to being required to pay costs of the Amended Originating Process. 36 In my view these considerations lead to the conclusion that neither Bovis nor Mr Javorsky and Mr Hurst should be ordered to pay the costs of the other with respect to any of the three matters raised in the cross-claim. I shall make no order for costs of the cross-claim, with the intention that each party bear their own costs. 37 As regards proposed order (d), the intention is to give Bovis and Mr Wily the priority ranking allocated to certain expenses by s 556(1)(dd). That provision allocates priority to "any other expenses … properly incurred by a relevant authority". The expression "relevant authority" is defined in s 556(2) to include a liquidator, an administrator and an administrator under a deed of company arrangement. As I understand it, the order would amount to a declaration establishing that the costs incurred by the Company pursuant to proposed orders (a) and (b) were "properly" incurred, and that they were incurred by Mr Javorsky as administrator of the Company. 38 It seems to me appropriate that such an order be made. The Company was a proper, and probably a necessary, party to the proceeding, since it was a party to the deed which was to be terminated, and the orders sought by Bovis closely affected its affairs. Costs have been incurred in establishing that the creditors' resolution to execute the deed of company arrangement should be set aside, that the deed should be terminated, and that the deed administrator should be removed. These matters go to the foundation of the external administration under which the claims of unsecured creditors were to be considered. It seems to me fair that the costs of establishing these matters should be given priority over the claims of ordinary unsecured creditors. I have reached the conclusion that the Company should, with others, the responsible for those costs. In my view this is a case where the costs were "properly incurred" for the purposes of s 556(1)(dd). 39 Proposed orders (e) and (f) to seek to establish that Mr Javorsky's liability to pay costs should not be limited to the assets of the Company, and that he should be denied a right of indemnity to recover costs from those assets. Proposed order (e) relates to the costs of Bovis which the Court will order Mr Javorsky to pay, and proposed order (f) relates to the payment of Mr Javorsky's own costs, and the costs of the Company as defendant. 40 The application for these orders raises two distinct issues: first, whether the order that Mr Javorsky pay the costs of Bovis should be limited to the assets of the Company; and secondly, whether Mr Javorsky should be denied his right of indemnity to recover costs payable to Bovis from the assets of the Company (whether or not the order is limited to the assets of the Company). In Cresvale Far East Ltd v Cresvale Securities Ltd (No 2) (2001) 39 ACSR 62 I endeavoured to set out the principles governing these matters. 41 As to whether the Court should limit an order for costs made against a defendant administrator to the assets of company, I expressed the view in Cresvale (No 2) that the normal costs order is an order that the administrator pay the successful plaintiff's costs without limitation to the company's assets (at paragraph [64]). In reaching this conclusion, I referred to some observations by Young J (as the Chief Judge in Equity then was) in Re Biposo Pty Ltd; Condon v Rogers (No 3) (1995) 17 ACSR 730, with respect to the analogous position of liquidators appointed after a process of voluntary administration (Cresvale (No 2), at paragraphs [46]ff). His Honour agreed (at 739) with the submission by counsel for the liquidators that a survey of the cases had shown that "the general rule was that unless a liquidator had been removed on the ground of corruption or maladministration the liquidator was entitled to his costs out of the assets of the company, and that the opponent's costs also came out of the assets." That proposition, taken on its face, seemed to me to go beyond other authorities, according to which an order expressly limiting recovery to the assets of the company would be made only where the opponent did not object or it was clear that the assets of the company were adequate to cover the amount of costs that would be recoverable. 42 Young CJ in Eq was a member of the Court of Appeal on appeal from my judgments in the Cresvale litigation: sub nom Kirwan v Cresvale Far East Ltd (in liq) (2002) 44 ACSR 21. He explained that in Re Biposo, his purpose in making a general order reserving further consideration was to deal with the problem that would arise if the company's assets were insufficient to meet the costs obligation. Thus, notwithstanding the apparent breadth of the "general rule" articulated in the judgment, Re Biposo was not to be taken as authority for the proposition that the Court would normally limit its costs order against a liquidator by reference to the assets of the company. His Honour said (at paragraph [422]) that as a general guideline, a liquidator or administrator acting appropriately is entitled, if unsuccessful, to have the costs of the defence paid by the company; but at paragraph [434], he expressed the opinion that the appropriate order for costs as between an unsuccessful liquidator or administrator and the adverse litigant, was simply an order that the latter pay the costs of the former. 43 My overall conclusion is that his Honour's observations support the view that it is not normally appropriate to include in the order for costs an express limitation to the assets of the company. I shall not do so on this occasion. Indeed, counsel for Mr Javorsky did not invite the Court to do so. 44 That leaves the question whether I should make an order excluding Mr Javorsky's right of indemnity against the assets of the company for his own costs, and for the costs of Bovis which he will be liable to pay. In Cresvale (No 2) I held (at paragraphs [66]ff) that the statutory right of indemnity conferred upon an administrator by s 443D is not available to an administrator under a deed of company arrangement. However, I held (at paragraphs [70]ff) that an administrator under a deed, defending proceedings to terminate the deed and to remove him from office, has an equitable right to an indemnity as deed administrator and as agent of the company. But the equitable right is limited, and is not available where an expense is not "properly incurred" (Adsett v Berlouis (1992) 37 FCR 201, 212-3). I held in Cresvale (No 2) (at paragraph [75]) that the deed administrator's contractual right of reimbursement of expenses was subject to an implied limitation equivalent to the limitation on his equitable right. As I read the judgments of the Court of Appeal in Kirwan v Cresvale Far East, there is nothing in them that is inconsistent with these findings and statements of principle, and indeed the principle as to the limits of the right of indemnity is supported by Young CJ in Eq's judgment at [420] and [423]. 45 It seems to me that Mr Javorsky's position, like the position of the deed administrator in Cresvale (No 2), is that he has an equitable right of indemnity, limited to expenses properly incurred, and his contractual right under clause 6.2(b) of the deed of company arrangement is to no different effect. Counsel for Mr Javorsky did not contend otherwise. 46 Bovis contends that this is a case of maladministration sufficient to attract personal liability for costs. Counsel for Bovis says there were nine substantive deficiencies found in the administration conducted by Mr Javorsky, three relating to Mr Franklin's lack of independence, three relating to inadequacies in investigation, and five (with overlapping) relating to inadequacies in the administrator's report. It is not necessary for me to reiterate these deficiencies here, although I am satisfied that the summary of them in the written submissions of Bovis is adequate as a summary. These various deficiencies were of a quality and quantity sufficient to lead me to conclude that Mr Javorsky be removed from his office as administrator rather than simply leaving his office to be dissolved by termination of the deed of company arrangement (Judgment, paragraph [381]). 47 On the other hand, I decided (Judgment, paragraphs [369]-[373]) that there was no ground for reducing Mr Javorsky's remuneration as approved by creditors, after counsel for Bovis had invited me to apply to that question the principles with respect to personal costs orders that I had discussed in Cresvale (No 2). I took into account (Judgment, paragraph [372]) the considerations now urged by Bovis as the basis for a personal costs order against Mr Javorsky, but I noted (Judgment, paragraph [373]) that Mr Javorsky was not aware of the full extent of Mr Franklin's involvement with Mr Gilbert, and that his mistakes did not reflect on his honesty or overall conscientiousness. It would be inconsistent with these findings for me now characterise Mr Javorsky's conduct as amounting to maladministration for the purpose of a personal costs order. Reviewing my findings with respect to Mr Javorsky's conduct as a whole, my conclusion is that there is no basis for denying him access to the assets of the Company with respect to the costs payable by Bovis; nor, in limine, with respect to his own costs of the proceeding. If there is any issue that a particular item of costs was not properly incurred in respect of the proceeding, that can be a matter for subsequent determination. 48 Counsel for Mr Javorsky invited me to make an order confirming that the amounts in respect of which Mr Javorsky is entitled to an indemnity are expenses to which s 556(1)(a) applies. It seems to me undesirable to make a declaration on this topic, since the interests of other creditors not before the Court are involved, but I am prepared to express some views on the matter on the basis of the material before me now. I am not convinced that Mr Javorsky's own costs or the costs payable to Bovis are properly described as expenses incurred "in preserving, realising or getting in property of the company, or in carrying on the company's business", for the purposes of s 556(1)(a). However, my finding that the right of indemnity is available suggests (though not conclusively) that they are "other expenses … properly incurred by a relevant authority" for the purposes of s 556(1)(dd). 49 Proposed orders (g) and (h) relate to the position of Mr Hurst. He was a proper party to the proceeding as he was the decision maker, as purported chairman of the second creditors' meeting, upon the admission of claims for voting purposes. Bovis submits that as Mr Hurst was an employee of Mr Javorsky, acting under Mr Javorsky's direction, it is not appropriate to visit a costs order upon him; but it is appropriate that he bear his own costs of the proceeding, including the cross-claim. I agree with these submissions. 50 Bovis also submits that the costs to be borne by Mr Hurst should not be borne by the Company through Mr Javorsky's right of indemnity. I have decided that there is no basis for excluding Mr Javorsky from access to the assets of the Company for recovery of his own costs. I see no proper basis for distinguishing between Mr Javorsky's own costs, and any costs he may incur through reimbursing the costs of his employee, Mr Hurst. Costs in proceeding No 1088 of 2001 51 Bovis submits that I should order Mr Gilbert and Tui Gilbert Holdings, the applicants, to pay the costs of the liquidator and of Bovis in respect of the interlocutory process. 52 In my opinion the submission is clearly correct. I concluded that the interlocutory process should be dismissed. I held that there was no automatic stay or termination of the winding up upon the appointment of an administrator or execution of the deed of company arrangement, and the applicants' claim based on s 447A did not fall for determination because of my decision in proceeding No 1309 of 2002 to terminate the Deed under s 445D. 53 One small complication is that, although orders were made under paragraph 2.13 of the Corporations Rules for Mr Gilbert and Interline (NSW) to be heard on all aspects of the three proceedings, it appears that no similar order was made formally to authorise Bovis to be heard on the application in proceeding No 1088 of 2001. In fact, however, Bovis was heard and made full and successful submissions, on the assumption that it had been authorised to do so. This is therefore an appropriate case to cure the oversight by granting leave under paragraph 2.13 now, nunc pro tunc: see Re NRMA Limited Insurance (No.1) (2000) 33 ACSR 595 at [45]. Conclusions 54 My orders will therefore be: (1) In proceeding No 6062 of 2001, order that the plaintiff pay the defendants' costs as agreed or assessed; (2) In proceeding No 1309 of 2002, order that (a) the first, second, third and fifth defendants pay the plaintiff's costs of the proceeding (excluding the costs of the cross-claim); (b) the first, second, third and fifth defendants pay the fourth defendant's costs of the proceeding (excluding the costs of the cross-claim); (c) that there be no order for costs with respect to the cross-claim, with the intention that the parties to the cross-claim claim bear their own costs; (d) that with respect to orders (2)(a) and (b), so far as the second defendant is concerned, the plaintiff's and fourth defendant's costs be costs in the liquidation of the second defendant; (3) In proceeding No 1088 of 2001, order that (a) Bovis Lend Lease Pty Ltd be granted leave to be heard under paragraph 2.13 of the Corporations Rules; (b) the applicants, Tui Gilbert and Tui Gilbert Holdings Pty Ltd, pay the costs of the interlocutory process, of Bovis Lend Lease Pty Ltd and the liquidator, Andrew Wily, as agreed or assessed. **********

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