Decon Australia Pty Ltd v TFM Epping Land Pty Ltd

1. The proceeding be dismissed.
2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCKERRACHER J: 1 These proceedings for the winding up of the first defendant, TFM Epping Land Pty Ltd, and the second defendant, Katoomba Residence Investment Pty Ltd (KRI) are to be dismissed (winding up proceedings). Reasons given in Decon Australia Pty Ltd v TFM Epping Land Pty Ltd (No 2) [2021] FCA 32 and Decon Australia Pty Ltd v TFM Epping Land Pty Ltd (No 3) [2021] FCA 147 in relation to costs are relevant background to the dismissal of the proceedings. 2 The plaintiff, Decon Australia Pty Ltd consents to the dismissal of these winding up proceedings in light of the outcome of the proceedings in NSD 817 of 2020 which concerned a challenge by Decon to the deeds of company arrangement entered into by TFM and KRI under s 445D of the Corporations Act 2001 (Cth) (DOCA proceedings). It contends, however, that its costs in the winding up proceeding should be paid as agreed or assessed by the companies because the adjournment of these proceedings was caused by the entry of the companies into voluntary administration only eight days after the winding up proceedings were commenced. This was referred to at [44]-[45] in Decon (No 2) where I said: 44 On 22 June 2020, Decon filed the Winding Up Application. 45 On 30 June 2020, the remaining (and sole) director of each of TFM and KRI, Mr Guoqiang Zhang, resolved to place the companies into voluntary administration and appointed the Administrators. 3 Decon relies upon observations in Bridgecorp Finance Ltd v Sterling Estates Development Corporation Pty Ltd [2006] NSWSC 961 where Austin J noted that the Court has a statutory discretion as to the cost of any proceedings before it arising from s 1335(2) of the Corporations Act. His Honour observed (at [13]): The Corporations Act gives little guidance as to the circumstances in which the court should exercise its statutory discretion under s 1335(2) in favour of an unsuccessful plaintiff in a winding up proceeding. Under s 467(1)(a) the court may, on hearing a winding up application, dismiss the application with or without costs. That confirms the court's power to make an order for costs in favour of the plaintiff, but it does not offer guidance as to the discretionary principles to be applied. Where a winding up application succeeds, the costs in respect of the application for the order (including the applicant's taxed costs payable under s 466) have the priority ranking accorded by s 556(1)(b). Section 466(2) obliges a liquidator, unless the court orders otherwise, to reimburse the taxed costs of the applicant for winding up. Those provisions reflect the legislature's policy that the claim of the applicant for winding up to recover costs out of the assets of the company in winding up is not only to be recognised, but to be afforded high priority. It seems to me that, prima facie, the same approach is appropriate where the plaintiff's application for winding up does not succeed because of the intervention of another form of external administration, namely voluntary administration followed by administration under a deed. 4 Decon addressed this matter in written submissions in connection with both proceedings at my invitation. The contention by Decon in relation to payment of its costs in the winding up proceedings had not been addressed by the Administrators of TFM and KRI who are not party to these proceedings but are the third and fourth defendants in the DOCA proceedings. Given the issues at play, I also invited submissions from the Administrators on this point. 5 The Administrators do not take issue with the general principles stated in Bridgecorp however, contend that it is plainly distinguishable on the facts. 6 Bridgecorp concerned the costs of a contested application to adjourn a winding up proceeding where voluntary administrators were appointed the day prior to the scheduled hearing of a winding up application. Factors relevant to the Court's discretion to award costs of the winding up application and the adjournment application to the plaintiff included: (a) the adjournment was an 'indulgence' sought by the administrators (at [15]); (b) the evidence in support of the adjournment was 'less than compelling' (at [15]); (c) the voluntary administrators initially opposed deeds of company arrangement that were proposed (at [15]); and (d) it was not unreasonable for the plaintiff to oppose the application (at [16]). 7 This case did not involve an application by the Administrators to adjourn the winding up application. The second meeting of creditors was scheduled to occur before the winding up proceedings were listed for hearing. Decon unsuccessfully sought to restrain the second meeting of creditors. It failed to establish that sufficient prejudice would arise by virtue of the second meeting of creditors going ahead: see Decon Australia Pty Ltd v TFM Epping Land Pty Ltd [2020] FCA 1085 per Stewart J (at [42]). 8 If that were the end of the matter, Decon's claim for costs of the winding up proceedings in reliance on Bridgecorp would be more difficult to resist - the Administrators do not submit that the winding up applications were originally flawed. However, after the Administrators' appointment, Decon embarked on an unsuccessful application in the DOCA proceedings at obviously not inconsiderable cost to the general body of creditors. The disposition of costs in the DOCA proceedings is addressed in Decon (No 3). 9 In the circumstances, the Administrators argue that the Court would not view Decon's costs of the winding up proceedings in isolation. When the totality of Decon's conduct is considered in context, the Court would not exercise a discretion to place Decon at an advantage with respect to the other creditors of TFM and KRI in respect of legal costs. 10 The Administrators therefore contend that the Court should not make an order that TFM and KRI pay Decon's costs of the winding up proceedings. 11 Alternatively, the Administrators argue, to the extent that the Court is minded to make an order for costs in Decon's favour in respect of the winding up proceedings, such an order should specify that such costs are provable in the administration of TFM and KRI with the priority of an ordinary unsecured creditor. 12 In my view, there is something to be said for both Decon's arguments and the Administrators' arguments. Decon is correct in its identification of the unusual timing aspects and on some other factual aspects assessed in Decon (No 2) but equally it has not succeeded in its various and not insignificant challenges addressed in Decon (No 2). The two cannot be viewed independently. The costs of these particular proceedings are insignificant when compared with the costs incurred in the DOCA proceedings. 13 In my assessment the appropriate disposition of the costs debate when considering all factors is that there should be no order as to costs in this proceeding. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.