Decon Australia Pty Ltd v TFM Epping Land Pty Ltd

1. There be no costs order as between the Plaintiff and the First and Second Defendants.
2. The Plaintiff pay the costs of the Third and Fourth Defendants to be assessed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCKERRACHER J: 1 In Decon Australia Pty Ltd v TFM Epping Land Pty Ltd (No 2) [2021] FCA 32, I dismissed an application by the plaintiff, Decon Australia Pty Ltd seeking relief against deed administrators appointed to each of the first defendant, TFM Epping Land Pty Ltd, and the second defendant, Katoomba Residence Investment Pty Ltd (KRI). I invited submissions on costs. 2 The Administrators (the third and fourth defendants) submit that the ordinary rule regarding costs should apply, namely, that costs should follow the event. They base that submission on the fact that the proceedings commenced by Decon caused the Administrators to incur costs in respect of applications for both interim and final relief (the interim relief being refused by Stewart J in Decon Australia Pty Ltd v TFM Epping Land Pty Ltd [2020] FCA 1085 (Decon (No 1)), thus the Administrators press for an order that Decon pay their costs of and incidental to the proceedings, as agreed or assessed. 3 This application is difficult to resist and, indeed to its credit, Decon has not done so. Nonetheless, it is necessary to say a little more in relation to the exercise of discretion in relation to the orders sought. 4 Decon sought interim relief in the proceedings primarily to restrain the second meeting of creditors of TFM and KRI until further order and to restrain TFM and KRI from entering into deeds of company arrangements (DOCAs). That application for interim relief was dismissed by Stewart J on 28 July 2020 in Decon (No 1). The costs of the interim hearing were reserved on the basis that the outcome of the second meeting of creditors and the final relief may have had a bearing on the question of costs: see Decon (No 1) (at [44]). 5 In relation to both those matters, it was resolved at the second meeting of creditors of both TFM and KRI that each company enter into the DOCAs and, secondly, Decon's final relief was subsequently dismissed in Decon (No 2). 6 In circumstances where a creditor seeks to challenge a DOCA pursuant to s 445D of the Corporations Act 2001 (Cth) and fails, the conventional order is that the creditor should meet the costs of the application. There is nothing within s 445D of the Corporations Act or the amendment provisions of the Insolvency Practice Schedule (Corporations) which would cause the Court to depart from the conventional approach to costs. Decon has caused the Administrators to incur costs in addressing an application brought by them pursuant to, primarily, s 445D of the Corporations Act. In University of Sydney v Australian Photonics Pty Ltd [2005] NSWSC 412, Palmer J said (at [40]-[41]): 40 The question of costs has been argued briefly. There is no dispute that the Plaintiff, having been unsuccessful, must pay the Defendants' costs. There is no dispute that the costs order, as far as the Second Defendant is concerned, will be on the party/party basis. However, both Mr Coles QC and Mr Newlinds SC urge that the Plaintiff should pay the administrator's costs on an indemnity basis, the reason urged being that it should not be the fund established under the Deed of Company Arrangement which should bear any part of the costs of this litigation. 41 There is certainly force in what Mr Coles and Mr Newlinds say. However, I think that this is one of those cases which are analogous to cases involving a trustee of a fund who is a necessary party to proceedings. The trustee is always indemnified out of the fund to the extent that it is not otherwise able to recoup costs from the unsuccessful party. I think that this is a case in which an indemnity costs order against the Plaintiff should be made only if the Plaintiff has been guilty of some conduct meriting the disapprobation of the Court. That has not been the case here. 7 The Administrators have not sought indemnity costs and do not suggest that the conduct of Decon is deserving of any disapprobation by the Court, but that said, Decon would equally accept that the broader creditors of TFM and KRI ought not bear the cost of and incidental to the Administrators' response to the proceedings, which is the result which would follow if a costs order against Decon were not made. 8 As between Decon and TFM and KRI, Decon submits and I accept that each party should bear its own costs. TFM and KRI did not appear in the proceedings and played no active role, other than by the delivery of some unsigned submissions by email from their common director shortly after the commencement of the first day of hearing, on 7 September 2020. 9 There is a further submission from Decon in relation to costs orders in the winding up proceeding (NSD684/2019) which was commenced shortly before TFM and KRI were placed into administration and which was somewhat overtaken by events. That will be dealt with in the winding up proceeding. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.