- Commonwealth of Australia v Gretton

- Commonwealth of Australia v Gretton - [2017] NSWSC 1829 - NSWSC 2017 case summary — Zoe

Identity of liquidator to be appointed

There is a difference between the parties as to the identity of the liquidator to be appointed. The Plaintiffs sought the appointment of Mr Condon as liquidator and the Defendants sought the appointment of Mr Louttit as liquidator. Neither party said anything adverse to the integrity or professional values or competence of the other party's choice of liquidator and nothing in this decision involves any question of that kind.
It appears that Mr Louttit's rates are, at least on their face, somewhat lower, in several categories, than those of Mr Condon's. It must be recognised, however, that any comparison by hourly rates provides limited assistance in determining the total cost that will be incurred in a liquidator's work because much will depend upon how much time is spent in undertaking the relevant work. It must also be recognised that, in any event, the amount of a court-appointed liquidator's remuneration is subject to the Court's control because, notwithstanding that a liquidator may have quoted hourly rates, he or she will not necessarily be remunerated by reference to those rates and the amount of his or her remuneration will ultimately require approval of creditors or the Court.
I recognise that, in the ordinary course, the Court will accept a plaintiff's choice of liquidator: Re Hayes Steel Framing Pty Ltd (admins apptd) [2017] NSWSC 385. However, in the course of submissions before me on the last occasion, Mr Price fairly drew attention to the fact that the Plaintiff's choice of liquidator in this case largely reflected the fact that the Plaintiff's solicitor and Mr Condon, the liquidator proposed to be appointed, had had many dealings over many years. That, of course, is not a matter of criticism for either Mr Condon or the Plaintiff's solicitor. It seems to me, however, that where a liquidator is to be appointed in circumstances that shareholders are in dispute, and assuming, as I do, that Mr Condon would behave with complete independence, the appearance of independence would be promoted by the appointment of a liquidator who does not have a long term professional relationship with the solicitor for one shareholder.
After I delivered my initial oral judgment, Mr Martin (who appears for the Defendants on a direct brief) properly drew my attention to the fact that he had appeared for Mr Louttit as Counsel on several occasions over the last 10 years. Mr Price, who appears for the Plaintiffs, properly made clear that he wished to make no further submissions in respect of that matter. I had taken the view that it was preferable that Mr Condon not be appointed because of what appeared to be a longstanding professional relationship between the Plaintiffs' solicitor and Mr Condon, in the particular circumstances. It does not seem to me that Mr Martin's having appeared for Mr Louttit, in several matters over a long period, is of the same character. It would not be expected that Mr Martin, as Counsel who appeared for the Defendants in this matter without an instructing solicitor, would have the same degree of day to day involvement in a liquidation as a solicitor acting for the parties might have. The difference is, of course, that a barrister's role as advocate is not likely to involve the day to day interactions with a liquidator as the role of a solicitor acting for one of the parties might. For these reasons, while this matter was appropriately drawn to the Court's attention, I do not consider it requires any amendment to the orders to be made.
It seems to me that the combination of the desirability of promoting the appearance of independence, once again accepting that Mr Condon would in fact have been independent if appointed, and the lesser costs, at least on an hourly rate basis, indicated by Mr Louttit indicate that it is preferable that he be appointed.

[4]

Costs

A question also arises between the parties in these proceedings as to the proper costs order that should be made in circumstances that I had held that the Company should be wound up under s 461(1)(k) of the Corporations Act 2001 (Cth). I had not accepted significant aspects of the Plaintiffs' case, including their claims that the Company should be wound up on the grounds of oppression, in reliance on an alleged breach of an agreement precluding the participation of the directors' wives in management, exclusion of the Plaintiffs from management, or refusal of access to financial information. I had also not held that the primary relief sought by the Plaintiffs, namely an order for indemnification of them in respect of certain guarantees, should be granted, or that alternative relief which they then propounded should be granted. The proceedings continued over two days, and it seems to me, as a matter of impression, that they would have proceeded more quickly, and would on any view have finished within a day, had the Plaintiffs sought a narrower range of relief on which they were successful.
Mr Price points out that a significant amount of the first day of the hearing was devoted to the cross-examination of one of the Defendants, Mr Bolton, and that I had observed in my judgment that Mr Bolton was, at best, a difficult witness, who undoubtedly posed a challenge to a cross-examiner. While I accept that proposition, it nonetheless seems to me that, had the Plaintiffs put a narrower case, the field of cross-examination of Mr Bolton would itself have been significantly narrower, because that case would turn primarily on the proposition, on which the Plaintiffs ultimately succeeded, that the Defendants did not propose to take any steps, in the indeterminate future, to seek to secure the Plaintiffs' release from their guarantee given in respect of the Company, notwithstanding that the Plaintiffs were no longer involved in it, and that that was ultimately sufficient to support oppression. I recognise, however, that that is easy to say with hindsight, and harder to say when proceedings commence, and that allowance should be made for the fact that Counsel would have felt obliged, properly, to review a wider range of material in cross-examination, against the possibility that a narrower case of that kind would not succeed. I remain of the view that even that wider case, if the relief sought had been narrower, would have been much shorter than the case that was ultimately put by the Plaintiffs.
Mr Price initially put that the Plaintiffs should have their costs of the application, on the basis that they had succeeded, albeit not on the primary relief which they sought. Mr Martin submitted that each party should pay its own costs, on the basis that the Plaintiffs had failed on the primary relief that they had sought, and on their alternate relief, although they had succeeded in respect of winding up, which Mr Martin fairly acknowledged was part of the relief which they sought. Mr Price responded, as I have noted above, that cross-examination would have taken some time on a narrower case. Mr Martin responded that little of the evidence would have been necessary, had the narrower case been run. I have indicated that, as I have noted above, it seems to me that some time would have needed to be spent in cross-examination, even on a narrower case, and it is likely that a narrower case would still, with openings, evidence and cross-examination, have taken in the order of a day, rather than the two days that the case ultimately took.
The general rule, as Mr Price points out, is that costs follow the event, but that rule has qualifications, which I reviewed at some length in my decision in Re Swan Services Pty Ltd (in liq) [2017] NSWSC 692. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, subject to Pt 42, if the court makes any orders as to costs, the court is to order that costs follow the event, unless it appears to the court that some other order should be made as to the whole or any part of the costs.
In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA (with whom Mason P agreed) observed at [121] that: "underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs."
That observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98].
In Re Swan Services Pty Ltd above at [26], I observed, with reference to authority, that the court does not generally attempt to differentiate between the issues on which a party is successful and those on which it failed, although it may deprive a successful party of the costs relating to an issue which it lost when that issue is clearly dominant or separable. I also observed with reference to my earlier decision in Kraissa v Hair Industrie Penrith Pty Ltd [2015] NSWSC 1905 at [5] that a costs order in favour of a successful party may be modified to reflect its failure on particular issues even if the successful party did not act unreasonably in raising them, and that: "it may be appropriate to deprive a successful party of costs or a portion of its costs if the matters upon which it was unsuccessful took up a significant part of a trial, either by way of evidence or argument, and an issue by issue approach may be adopted if it will allow a fairer result than giving a party all of its costs". [omitting citations]
It seems to me that the Plaintiffs here advanced a relatively wide case, including seeking orders as to indemnification as to which they were unsuccessful, as well as the orders for a winding up on which they succeeded. Although there is undoubtedly an overlap in the evidence, and although a part of the time necessary for the hearing would have been required even if a narrower case had been run, the extent of cross-examination of the witnesses, particularly Mr Bolton, did reflect the presence of the indemnification case, and also, importantly, the case as to the agreement between the parties of the exclusion of wives from management, on which the Plaintiffs were unsuccessful. To put that proposition another way, the case would have moved more quickly had those issues not been raised.
In these circumstances, it seems to me that there would be a substantive unfairness to the Defendants in awarding the costs of a two-day hearing against them, where a narrower hearing leading to the results which the Plaintiffs ultimately achieved on narrower grounds would have been significantly shorter. It does not, however, follow, as Mr Martin submits, that the proper order is that there be no order for costs, since such an order would give no weight to the fact that, ultimately, the Plaintiffs were successful, and they would not have needed to pursue the case, or incur the costs of running it, had the Defendants submitted to a winding up order, rather than opposed it throughout the hearing.
For these reasons, I am satisfied that the proper order is that the Defendants pay half the costs of and incidental to the proceedings, as agreed or as assessed.

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Cases Cited (6)