Gadsden v MacKinnon

1. The defendants pay 50% of the plaintiffs' costs of the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

O'CALLAGHAN J: 1 On 15 June 2023, I made the following orders that were sought by the plaintiffs: 1. Pursuant to ss 90-10, 90-15 and 90-20 of the Insolvency Practice Schedule (Corporations), Mr Hamish MacKinnon and Mr Nicholas Giasoumi cease to be external administrators of Allibi Pty Ltd (ACN 124 066 717) (in liquidation) (Allibi). 2. Mr Craig Crosbie and Mr Robert Ditrich each a registered liquidator be appointed liquidators of Allibi. 3. The parties file and exchange written submissions about costs not exceeding three pages within 7 days. See Gadsden v MacKinnon (Liquidator), in the matter of Allibi Pty Ltd (in liq) [2023] FCA 647. 2 These brief reasons address the question of costs, and assume familiarity with those earlier reasons. 3 The parties filed brief and helpful written submissions about costs, in accordance with my orders. 4 The plaintiffs submitted that an order should be made that the first and second defendants, the removed liquidators, pay their costs of the proceeding to be assessed in a lump sum pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth). They submitted that such an order is appropriate because they succeeded in obtaining the removal order, and that costs should follow that event. 5 The defendants, on the other hand, submitted that there should be no order as to costs, or that: [t]he party/party costs which the defendants may be ordered to pay should be reduced by an amount or percentage which fairly reflects the success they have had on all grounds, other than the $69m demand ground, the plaintiffs' late capitulations on some grounds, their failures with respect to the other grounds and their late withdrawal of the application for summary judgment. 6 The crux of the defendants' submission was that: In the present case, both the plaintiffs and the defendants have had a measure of success which justifies a departure from the usual course … Of particular significance is the plaintiffs' abandonment of their summary judgment application on the eve of its hearing, the mercurial nature of their case both before and during trial and the service of expert evidence the day before trial. The plaintiffs advanced nine grounds in support of the application, four of which were withdrawn on 9 May 2023 (the day prior to trial), 10 May 2023 (during trial) and 18 May 2023 (in closing submissions). Only 5 grounds remained. … Ultimately, the plaintiffs failed on all grounds except the demand. Whilst the Court held that it was strictly unnecessary to deal with them in detail in the reasons, it found that the other grounds, even had they been made out, were not sufficient to warrant removal … (Citations omitted.) 7 The award of costs is in the discretion of the court. See s 43(2) of the Federal Court of Australia Act 1976 (Cth). 8 That discretion extends to making an order apportioning costs. The exercise of this discretion is based on the court's impression and evaluation, not mathematical precision. See Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 346; (1993) 26 IPR 261 at 272 (Gummow, French and Hill JJ). 9 The general rule is that costs follow the event. The "event" may be characterised in more than one way. Generally it refers to the result of the claim and may be understood as referring to its practical result. See Doppstadt Australia Pty Ltd v Lovick & Sons Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA). 10 Where there has been a mixed outcome, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broadbrush basis, and largely as a matter of impression and evaluation by the court. See Doppstadt at [19]. See too Dodds Family Investments at 272. 11 In this case, given that the plaintiffs failed on, or at the last moment abandoned, a number of alternative grounds for the removal application, it is appropriate to make an order apportioning costs. I agree with the defendants' submission that the award of costs in favour of the plaintiffs should be reduced fairly to reflect (i) the extent to which grounds of the plaintiffs' case were either not pressed or failed and (ii) the time and expense which it can sensibly be assumed was taken up in addressing those elements in the course of preparation for, and at, the trial. 12 In my view, and recognising that it is necessary to apply a broadbrush and impressionistic approach to the matter, the appropriate order is that the defendants pay 50% of the plaintiffs' costs of the proceeding. I will make an order accordingly. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.