//
[51]
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2010] WASC 138
Supreme Court of WA
2010-06-15
Mr P, Miere J
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 1 -v- THACKRAY
MATTER : Great Southern Managers Australia Limited (ACN 083 825 405) (In Liq)
BETWEEN : GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 1
THE GROWERS LISTED IN SCHEDULE 8 OF THE APPLICATION
Corporations - Application by liquidators for directions - Managed investment scheme - Responsible entity in liquidation - Termination of head lease - Sale of scheme assets comprising of olive properties - Grower members each holding proprietary interest in olive properties - Whether justified in terminating lease - Unconscionability of exercising right to terminate lease - Issues unable to be determined at preliminary hearing - Orders made for asset sale agreements to proceed and for sale proceeds to be held on trust pending determination of rights proceedings - Orders made for conduct of rights proceeding
Corporations Act 2001 (Cth), s 477(2B), s 511, s 601ND(1), S 601NF(2)
Orders made for sale agreements to proceed and for sale proceeds to be held on trust pending determination of rights proceeding
Fourth Defendants : Mr G Bigmore SC & Mr S Hopper & Mr D Marsh
Fourth Defendants : Mr P D Cruthfield SC & Mr J A Thomson
Humphris (as Administrator of Hazelton Air Charter Pty Ltd) v Mentha [2002] FCA 529
Re Timbercorp Securities Ltd (in liq) (No 3) [2009] VSC 510; (2009) 74 ACSR 626
1 LE MIERE J: This is an edited version of the reasons for decision which I delivered on 25 May 2010. I have added an introduction to identify the parties and the context of the application.
2 The first plaintiff, GSMAL, is the responsible entity of five olive schemes which are registered managed investment schemes (MIS) under ch 5C of the Corporations Act 2001 (Cth) (the Act). The purpose of the olive schemes was the commercial cultivation and sale of olives for and on behalf of the scheme members, who are known as growers. There are approximately 4,065 registered growers in the olive schemes.
3 For the purpose of these proceedings the olive schemes were operated on properties in Western Australia which are legally owned by the second plaintiff (GSOC) and the third plaintiff (GSOH).
4 Each olive scheme, including the powers of GSMAL, is governed by a constitution. The constitutions of each of the olive schemes are in substantially the same terms.
5 Under the Head Leases GSMAL leased portions of the olive properties from GSOH or GSOC respectively for a non-commercial cash rent together with a variable proportion of the olive harvest. The Head Leases are all in similar terms. All but one Head Lease has a term of 20 years.
6 GSMAL subleased to the growers of each olive scheme one or more parcels of land known as grovelots, each being 0.1 ha on the olive properties, pursuant to Lease and Management Agreements (each a Sublease). In general, growers executed one Sublease per olive scheme, which specified the number of grovelots they leased.
7 GSMAL also utilises an olive processing plant located on the Dandaragan olive property that is legally owned by Great Southern Olive Processing Pty Ltd (GSOP).
8 There is evidence that GSMAL is hopelessly insolvent and has been unable to meet its obligations under the Head Leases or otherwise continue to manage the olive schemes. GSOC, GSOH and GSOP are also each hopelessly insolvent and are unable to meet their financial obligations. On 16 May 2009 the fourth to seventh plaintiffs, who I will refer to as the Liquidators, were appointed as joint and several voluntary administrators of GSMAL, GSOC, GSOH and GSOP. On 18 May 2009 Simon Read and the first to third defendants (who I will refer to as the Receivers and Managers) were appointed by a syndicate of secured lenders as the receivers and managers of the assets and undertakings of GSMAL.
9 On 19 November 2009 the creditors of GSMAL, GSOC, GSOH and on 3 December 2009, the creditors of GSOP, resolved that GSMAL, GSOC, GSOH and GSOP be wound up and that the Liquidators be appointed as joint and several liquidators.
10 On 11 December 2009 the Receivers and Managers issued winding up notices to the growers of each olive scheme under s 601NC of the Act as the purpose of the schemes could no longer be accomplished. The Receivers and Managers have not wound up the olive schemes.
11 Since shortly after the commencement of the voluntary administration of GSMAL, GSOC, GSOH and GSOP, and subsequently after the commencement of the liquidation, the Liquidators along with the Receivers and Managers, developed a strategy for an orderly realisation or recapitalisation of the olive schemes. This did not succeed in identifying any offer of a replacement responsible entity for the olive schemes. The process did however identify several parties interested in acquiring the olive properties and the olive processing plant on an unencumbered basis. The Liquidators have negotiated asset sale agreements with Kailis Organic Olive Groves Ltd and Sumich EVOO Australia Pty Ltd for the sale of the olive properties on an unencumbered basis.
12 The Liquidators applied to the court for, amongst other things, directions and approvals that they are justified in causing:
on the grounds that GSMAL has defaulted under the Head Leases, and the defaults are incapable of cure and the properties cannot be maintained; and
13 The termination of the Head Leases and the schemes would bring to an end the interests of the growers in the olive properties. Those steps if successfully completed have as their goal the sale of the olive properties to Kailis and Sumich free of encumbrances. The asset sale agreements with Kailis and Sumich are conditional upon court approval.
14 The growers are the fourth defendants. Some of them have entered an appearance. I will refer to those fourth defendants as the represented fourth defendants. The represented fourth defendants filed an interlocutory application which sought an order, amongst other things, that the Liquidators are not justified in terminating the Head Leases.
15 The Liquidators and the represented fourth defendants' applications came on for hearing on 12 May 2010 as a matter of urgency because the asset sale agreements with Kailis and Sumich will expire if court approval is not granted shortly.
16 At the hearing of the application on 12 May 2010 the Bendigo and Adelaide Bank Ltd (the Bank), which is in essence the holder of security interests over interests of some of the growers in the olive schemes, was joined as a fourth defendant.
17 At the hearing on 12 May 2010 counsel for the Liquidators summarised the relief being sought as follows:
18 The represented growers and the Bank submitted, in effect, that it was not possible to hear and determine the Liquidators' application and the represented growers' application because that would require evidence to address factual conflicts and the opportunity to cross-examine all of the witnesses. Counsel for the Liquidators accepted that contention and proposed that the court should determine, as a preliminary question, an issue concerning the proper construction of the lease agreement. Submissions were made concerning that proposal. It emerged that the proposed preliminary hearing would involve two issues. The first concerns the right of GSOC and GSOH as head lessor to terminate the Head Leases for breach. The second issue concerned the question of the unconscionability of exercising such a right. I determined that it was not possible to properly hear and determine either of those issues. The issue of whether or not GSOC and GSOH had the right to terminate the Head Leases for breach involved determining whether or not there had been a breach and whether or not there was an immediate right to terminate. Those questions, and the question of the unconscionability of exercising such a right, depended on the resolution of factual issues which the court was unable to determine at the hearing.
19 All of the parties represented desired the asset sale agreements to proceed and proposed that orders should be made to permit that to occur and for the sale proceeds to be held on trust pending the hearing and determination by the court of a proceeding to determine which person or persons have any rights to all or any of the sale proceeds, after the payment of certain expenses and deductions, and the extent of such entitlements.
20 The parties subsequently conferred in relation to the appropriate orders to be made. The parties have agreed on most of the orders to be made but there is disagreement on several of the orders. The proposed orders are contained in a minute of proposed orders dated 21 May 2010 prepared by the Liquidators' solicitors (the Minute). The Minute is annexed to these reasons for decision.
21 The represented growers and the Bank agree with the form of the proposed orders except that they submit that there should be some changes to [6] and [7] of the Minute and [8(e)] should be deleted. I will refer to those differences shortly.
22 I am satisfied that the court should make the directions set out in [1], [2] and [4] of the Minute. The court should make the order set out in [3]. The court should grant the approval set out in [5]. Subject to resolving the differences between the parties concerning the wording of orders 6, 7 and 8 I am satisfied that the court should make the orders set out in [6], [7] and [8] of the Minute. I am satisfied the court should make the orders set out in [9] - [15] of the Minute. I am satisfied the court should give the directions set out in [16] and make the orders set out in [17] - [21] subject to the amendments to [18] and [19] agreed by the parties at the further hearing on 21 May 2010.
23 Those orders enable the Liquidators to proceed with the asset sale agreements and provide for the proceeds to be held on trust pending the determination of the claims or rights to those proceeds. It is the liquidators' view that it is appropriate to extinguish the growers' rights because the sale agreement cannot proceed without it and the assets are wasting. The material before me satisfies me that it is in the interests of all parties that the sale agreements should proceed and that course was supported by all the parties.
24 I turn then to consider the differences between the parties concerning the form of the orders contained in [6], [7] and [8] of the Minute.
25 The represented growers submitted that the words 'including the Rights Proceedings' should be omitted from [6(b)(ii)]. The represented growers submit that the Liquidators should not deduct from the net proceeds of the sales under the asset sale agreements their costs and expenses of conducting the Rights Proceedings. Those costs and expenses will consist of the legal costs and expenses of conducting the Rights Proceedings. The represented growers submit that the entitlement of the Liquidators to those costs should await the outcome of those proceedings. However, the Liquidators have no funds from which to meet those costs. Counsel for the Bank submitted that the words 'subject to any further order of the Court' should be added to [6(b)(ii)]. In my view the represented growers' concerns will be adequately met by including the words 'including the Rights Proceedings' in [6(b)(ii)] but adding at the end of that subparagraph the words 'subject to any further order of the court'.
26 The represented growers submit that the words 'including the Rights Proceeding' should be deleted from [7] of the Minute for similar reasons. Paragraph 7 is concerned with the liquidators own remuneration. For the same reasons the disputed words should remain in [7(b)] but the words 'subject to any further order of the court' should be added. The parties also consent to deletion of the words 'remuneration referrable to' in [7(b)].
27 The represented growers and the Bank submitted that the words 'on account of their legal or equitable rights in rem with respect to any Sale Asset' should be deleted from [6] of the Minute. They submit that the inclusion of those words are unnecessary and may inadvertently restrict the rights in respect of which a claimant may make a claim against the Fund. I accept that submission. Those words should be deleted.
28 The represented growers and the Bank submit that subpar (e) should be deleted from [8]of the Minute. The intention of the orders is to permit the sales under the asset sale agreements to proceed and to preserve the claims and rights of all parties by turning their rights and interests in the assets to rights and interests in the Fund. That is the intention of order 6 which provides that upon completion of the sales and after deduction of relevant costs and expenses the net proceeds are to be held on trust pending the hearing and determination by the court of the Rights Proceeding to determine which person or persons have any and if so what rights to any part of the Fund. The formulation of this order is based upon the orders made by Robson J in Re Timbercorp Securities Ltd (in liq) (No 3) [2009] VSC 510; (2009) 74 ACSR 626. The orders made by Robson J in turn owed much to the analysis of Goldberg J in Humphris (as Administrator of Hazelton Air Charter Pty Ltd) v Mentha [2002] FCA 529.
29 In Re Timbercorp Securities Robson J, in circumstances having some similarity to the present case, made an order allowing a sale to proceed but the proceeds to be held in trust until the proprietary rights of the growers who were members of the relevant managed investment schemes to those sale proceeds were established. Robson J said that at the time he made the orders there was uncertainty as to precisely what property rights of the growers were to be transferred or surrendered as part of the consideration for the payment of the sale price. Having referred to the judgment of Goldberg J in Re Hazelton Robson J said that there are well recognised legal principles for determining the rights of several property owners whose property is lost or converted into a common fund. The fund, his Honour said, is to be divided by reference to the proportionate share of the fund measured by the extent and value of the claims or rights given up in exchange for an interest in the fund. That is the intention of the orders to be made in this case.
30 The Liquidators submit that [(e)] should be included in [8] of the Minute to ensure that the court may have regard to any step which any claimant or GSMAL was willing and able to take with respect to any rights to the sale assets between 12 May and 30 June 2010 or some other later date whether or not taken.
31 In the course of argument reference was made to steps which might be taken by the Liquidators or the growers if this application was not resolved and the sale of the assets had not proceeded. For example, there is a dispute between the Liquidators, the represented growers and the Bank about whether the notices of default given to GSMAL under the Head Leases were effective and GSOC and GSOH have an immediate right to terminate the Head Leases. The Liquidators may wish to argue that if the notices of default were ineffective for some reason then they could have given a further notice of default and subsequently terminated the leases pursuant to those notices. Such an argument will be available to the Liquidators whether or not [(e)] is added to [8]. In determining the various parties' claims to the Fund the court will have to consider not only the rights of the various parties given up or lost as a result of the orders to be made and the things done pursuant to the orders but also the value of those rights. The value of those rights will be affected by their liability or vulnerability to be terminated or defeated.
32 Another example referred to in the course of argument is the right of the growers to apply for relief against forfeiture if their subleases or the Head Leases were otherwise liable to be terminated. In determining the rights of the parties and the value of those rights, the court may have regard to the prospects of GSMAL or the growers applying for relief against forfeiture and the prospects of such an application succeeding. In considering those prospects the court may have regard to the likelihood of the applicant for relief against forfeiture being willing and able to cure any defaults or any other relevant matter.
33 I do not consider that [8(e)] is necessary or appropriate. There is a danger that the inclusion of the paragraph will cause the court to have regard to matters which it might otherwise not have regard to or to exclude from its consideration matters which it might otherwise have regard to in the course of determining the Rights Proceedings in accordance with the principles for determining the rights of several property owners whose property is lost or converted into a common fund as referred to by Robson J in Re Timbercorp and Goldberg J in Re Hazelton. That risk is accentuated by the introduction of an arbitrary time period commencing on 12 May 2010. Paragraph 8(e) of the Minute will be deleted from the orders made.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 1 -v- THACKRAY [2010] WASC 138 (S)
MATTER : Great Southern Managers Australia Limited (ACN 083 825 405) (In Liq)
BETWEEN : GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 1
THE GROWERS LISTED IN SCHEDULE 8 OF THE APPLICATION
Costs - Costs of objectors - Objectors' costs not to be determined until after the Rights Proceeding
ASIC v GDK Financial Solutions Pty Ltd (in liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580
Coad v Wellness Pursuit Pty Ltd [2009] WASCA 68; (2009) 71 ACSR 250
Corporate Systems Publishing Pty Ltd v Lingard [2009] WASCA 158
Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21 (S)
Great Southern Managers Australia Ltd (in liq) in its Capacity as Responsible Entity of the Managed Investment Schemes listed in Schedule 1 v Thackray [2010] WASC 138
Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516
Quatro Ltd v Argo Investments Ltd [1999] VSC 231; (1999) 32 ACSR 480
Re Arrowfield Group Ltd (1995) 17 ACSR 649
Re NRMA Ltd [2000] NSWSC 82; (2000) 33 ACSR 595
Re Timbercorp Securities Ltd (in liq) [2009] VSC 510; (2009) 74 ACSR 626
1 LE MIERE J: On 7 April 2010 the plaintiffs caused to be issued an interlocutory process for relief in which they sought various orders and directions. The application was subsequently amended. On 27 May 2010 I made orders in relation to the plaintiffs' application. The orders that I made, the reasons for making those orders, and the background to the matter are set out in Great Southern Managers Australia Ltd (in liq) in its Capacity as Responsible Entity of the Managed Investment Schemes listed in Schedule 1 v Thackray [2010] WASC 138. The orders made included an order that the costs of the proceeding be reserved. By interlocutory process filed on 29 July 2010 the fourth defendants named in sch 1 to the interlocutory process and represented by Clarendon Lawyers, who I will refer to as the Applicants, now seek an order that the liquidators pay the Applicants' costs of the proceeding in the following terms:
The liquidators of the first, second, third and eighth plaintiffs pay:
(a) the reserved costs in this proceeding, and
(b) the costs of this application,
of the Applicants on a full indemnity basis in accordance with Clarendon Lawyers' standard terms of engagement from the fund established from the completion of either or both of the Sumich Asset Sale Agreement and the Kailis Asset Sale Agreement.
Legal principles in relation to costs orders
2 Section 37(1) of the Supreme Court Act 1935 (WA) provides relevantly that subject to the provisions of the Act and to the rules of court the costs of and incidental to all proceedings in the court shall be in the discretion of the court or judge and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid. Order 66 r 1(1) of the Rules of the Supreme Court 1971 (WA) provides that subject to the express provisions of any statute and of the rules the costs of and incidental to all proceedings shall be in the discretion of the court but, without limiting the general discretion conferred on the court by the Act, and subject to O 66, the court will generally order that the successful party to any action or matter recover his costs. The discretion is very wide. The only fetters are those provided elsewhere in the Act and the rules, or any other Act and the fact that the discretion must be exercised judicially: Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516, [39] (Steytler P).
3 Although the court has a wide discretion to make what order as to costs the justice of the case requires, a proper and judicial exercise of that discretion will generally involve a consideration of the outcome of the case and the relative success achieved by each party. Those matters are relevant because a party who turns out to have unjustifiably either brought another party before the court, or given another party cause to have recourse to the court to obtain his rights, should be required to recompense the other party in costs.
4 Order 66 r 4(1) provides that where property is the subject of any action or matter, or where any question arising therein will affect any right or claim to property, the court may make an order that the costs of any party may be recovered out of the property with or without recourse against any other party, provided that no such order shall be made unless the court is satisfied that the party seeking the order had a genuine interest to protect, or that it was reasonable in the circumstances that he should appear.
5 Order 66 r 4 provides that the court may in the circumstances specified order that the costs of a party be recovered out of a fund, but the rule does not require such an order. Furthermore, the rule provides that an order for the payment of costs out of a fund shall not be made unless the court is satisfied the party seeking the order had a genuine interest to protect or that it was reasonable in the circumstances that he should appear. That will ordinarily require the court to consider whether to make an order for the payment of costs out of a fund after it has been determined whether the party has an interest in the fund and whether it was reasonable in all the circumstances for the party to take the position it did in the relevant proceedings.
6 In this case the proceedings are not relevantly completed. It has not been determined whether or not the Applicants have an interest in the relevant fund. That will be determined in the Rights Proceedings.
7 In their written submissions the Applicants submitted that they have acted in the role of objectors. The Applicants refer to a number of authorities where costs have been ordered in favour of an 'objector'. They include orders for costs in favour of objectors on a company's application for confirmation of a capital reduction. In Quatro Ltd v Argo Investments Ltd [1999] VSC 231; (1999) 32 ACSR 480 Hansen J held that the court has a discretion on costs in such proceedings. His Honour said that the discretion is to be exercised to do what is just in the particular case and that is done by paying close regard to the facts and circumstances of the case at hand. Those facts and circumstances include the reasonableness of the conduct of the company and an objector in relation to the reduction proposal and the confirmation hearing, and the substance or lack of substance of the point or points raised by an objector. In Re Arrowfield Group Ltd (1995) 17 ACSR 649 an objector was awarded his costs of objecting to a reduction of capital even though he was unsuccessful in his objections.
8 The cases referred to by the Applicants also include cases in which a fund that belongs to a secured creditor may be charged with another person's costs. In ASIC v GDK Financial Solutions Pty Ltd (in liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580 Finkelstein J observed that it is a long-settled rule that the costs incurred for the benefit of all persons having an interest in an asset (usually a fund that is subject to various claims) must be borne by the fund. The rule was confirmed and discussed by the Court of Appeal in Coad v Wellness Pursuit Pty Ltd [2009] WASCA 68; (2009) 71 ACSR 250.
9 In Re NRMA Ltd [2000] NSWSC 82; (2000) 33 ACSR 595 Santow J considered an application for orders convening scheme meetings and to approve an explanatory statement for a proposed scheme of arrangement pursuant to s 411 of the Corporations Law. Several objectors to the scheme opposed the orders. At the commencement of the application it was submitted by the objectors that it was appropriate for the court to make orders or directions that the companies contribute monies towards the legal costs of the objectors or provide an indemnity to the objectors by which they would in effect guarantee to pay the objectors' costs on an indemnity basis and not seek any order for costs against the objectors whatever may happen. Santow J declined to make the orders. Santow J stated at [45]:
Whether the costs of objectors on their objection should be met by the applicant scheme company has been the subject of a number of cases, but all of them were in relation to cost applications made at the conclusion of the convening hearings. The principles which emerge from the cases show why that must be so. I will attempt to distil their effect in these terms:
(i) The ordinary rule is that the scheme companies pay the objector's costs and do not suffer cost orders against them.
(ii) However, this is subject to the objections not being frivolous or without substance but rather such as to be properly and justifiably advanced, even if unsuccessfully. I would add that even sensible objections should be capable of being advanced with reasonable economy of time, consistent with the summary nature of a s 411(1) application.
(iii) These principles reflect the fact that the scheme procedure unavoidably must provide an independent court forum on two separate occasions - for convening and then to approve the scheme. The court will often be assisted by having a contradictor at either stage. It must not be forgotten that the end point of most schemes, if adjudged sufficiently fair and achieving the statutory majorities, is compulsory acquisition of the member's property and the court is no rubber stamp in that process.
(iv) Where there is a clear indication that objectors are using the tactics of technical and artificial objection so as to stall a scheme of arrangement for their own purposes, the courts will not hesitate to make costs orders against objectors to the extent warranted; those cost orders may even be indemnity cost orders in appropriate cases.
(v) Since assessment of the objections cannot be made in advance, cost orders should not be made in advance either.
10 The authorities referred to by the Applicants offer some guidance to the exercise of the discretion. However, the discretion in this case must be exercised having regard to the facts and circumstances of this case.
11 The Applicants put forward five reasons why their costs should be paid from the fund generated by the completion of the Sumich Asset Sale Agreement and the Kailis Asset Sale Agreement:
12 The plaintiffs object to the orders sought principally because it seeks a special costs order prior to the determination of the entitlement of any grower to the fund. The plaintiffs submit that if, as they contend, the growers have no entitlement to the Fund, the special costs order will pay the costs of a party with no entitlement and thereby effect a confiscation of property belonging to the true owners of that property without any foundation in the principles of the law of costs. The plaintiffs submit that the proper time to determine entitlement to costs is at the conclusion of the proceedings, when the merits of the parties' competing claims have been determined by the court. The plaintiffs submit that the authorities cited by the Applicants do not support such a departure from that principle and such a departure would be inconsistent with the rationale for costs orders adopted by this court and by other Australian and English courts.
13 The plaintiffs referred to Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21 (S). In that case the plaintiff sought orders that the trustees pay both the plaintiff's costs and the beneficiary defendants' costs of the action out of the trust fund. The plaintiffs relied upon O 66 r 4 of the Rules of the Supreme Court 1971 (WA) and submitted that in a claim arising out of a trust the successful applicants' costs are usually paid from the trust fund. The plaintiffs also pointed to the fact that they succeeded in establishing breaches of trust; that the consent defence was, they submitted, only partially successful; and the fact that the trustees' defence was amended at a late stage. Beech J did not accept the plaintiffs' submissions that the trustees should pay the costs of the plaintiff and the beneficiary defendants. His Honour said:
In substance, this litigation involved a contest between the plaintiffs, on the one hand, and the beneficiary defendants, on the other. The central issues related to the existence, enforceability, conditionality, construction and effect of the January 2002 Agreement. In my judgment, the beneficiary defendants have been substantially successful in the contest. A beneficiary whose claim of breach of trust fails on the ground that the beneficiary had consented to the breach of trust should not necessarily expect that the costs of the action will be paid by the trustee. Given the equal beneficial entitlements of the three parties, an order that the costs of the action be paid by the trustee defendants would, in substance, have the result that two-thirds of those costs would be borne by the beneficiary defendants. To my mind, that would not be a just exercise of the costs discretion in this case. Rather, the plaintiffs should pay the beneficiary defendants' costs of the action. However, because the plaintiffs had a measure of success in certain respects, I would not order that the plaintiffs pay the whole of the beneficiary defendants' costs ...[48].
14 An appeal to the Court of Appeal was dismissed. The Court of Appeal agreed with the reasoning of Beech J: Corporate Systems Publishing Pty Ltd v Lingard [2009] WASCA 158.
15 The plaintiff submitted that none of the authorities referred to by the Applicants, except for Re Timbercorp Securities Ltd (in liq) [2009] VSC 510; (2009) 74 ACSR 626, state or imply a principle that an award of costs may be made prospectively or in circumstances prior to a decision being made in respect to the parties entitlement to having an indemnity out of the relevant fund. The plaintiff submitted, and I accept, that this case is relevantly different from Re Timbercorp Securities. In Re Timbercorp Securities the growers by virtue of the terms of their subleases had a specific entitlement to occupy the land upon termination of the head leases. The liquidators conceded, and Robson J ruled, that this right had a value and that the growers had an entitlement to some part of the fund. In this case the plaintiffs deny that the growers have any entitlement to the fund or had any entitlement to the property from which the fund has been generated.
16 The parties made various submissions concerning the conduct of the hearing on 21 May 2010. The Applicants submitted, in effect, that they were successful in having orders made that established a fund rather than the growers' rights being extinguished. The growers' rights, if any, to the fund will be determined in the Rights Proceedings. The Applicants submit, in effect, that they were successful in their objections to the orders sought by the plaintiffs being made on 21 May 2010.
17 The plaintiffs submit that the orders that were made on 27 May 2010 resulted from serious allegations made by senior counsel for the Applicants on 21 May 2010 which had not previously been made and it is not clear whether the Applicants maintain those allegations in the Rights Proceedings.
18 I find it unnecessary to determine those issues. It is sufficient that I observe that at the hearing on 21 May 2010 senior counsel for the Applicants made serious allegations concerning the propriety of the conduct of the liquidators. The nature and extent of those allegations is now a matter of debate between the parties. However, the conduct of the liquidators will be in issue in the Rights Proceedings. The court's determination in relation to those issues is at least potentially relevant to the exercise of the court's discretion in relation to the costs of the proceedings to date.
19 The Applicants say that the application for judicial approval under s 511 Corporations Act 2001 (Cth) is now completed and the liquidator has been given approval to extinguish the growers' rights and the growers are entitled to their costs as objectors in that proceeding in any event. The orders made on 27 May 2010 permitted the sales under the Asset Sale Agreements to proceed and to preserve the claims and rights of the growers by turning their rights and interests in the assets to rights and interests in the fund generated by the sale of the assets. The central controversy between the parties is whether the growers had any right or interest in the assets the subject of the sale agreements. That will be determined in the Rights Proceedings.
20 It is premature to determine who should bear the Applicants' costs of the proceedings to date. The Applicants have been successful insofar as their intervention has prevented the growers' rights being wholly extinguished. The proceeds of the Asset Sale Agreements will constitute a fund. The rights, if any, of the growers to any part of that fund will be determined in the Rights Proceedings. If the growers are wholly unsuccessful in the Rights Proceedings then it may not be just to award them the costs of the proceedings to date. That is because the Applicants will have incurred those costs in pursuing, or seeking to maintain, rights which it will have been found do not exist. Furthermore, the Rights Proceedings will determine the allegations made by the Applicants concerning the conduct of the liquidators. The court was unable to determine those allegations at the hearing on 21 May 2010 and that led to the making of the orders on 27 May 2010 rather than the orders originally sought by the plaintiffs. If the allegations made by the Applicants are found to be wholly unfounded then it may not be just for the Applicants to be awarded their costs of the proceedings to date. Whether or not the Applicants had any right or interest in the assets the subject of the Asset Sale Agreements and whether or not the allegations made by the Applicants at the hearing on 20 May 2010 are wholly or partly made out is relevant to the exercise of the discretion whether the Applicants' costs should be paid out of the fund generated by the sale of the assets.
21 This case is different from cases concerning objections by minority shareholders to schemes involving capital reduction. In this case it has not yet been established that the Applicants, or growers, had any right or interest in the assets the subject of the sale agreements or have any right to, or interest in, the fund consisting of the proceeds of the asset sale agreements. It is premature to determine who should bear the Applicants' costs of the proceedings to date until it has been established in the Rights Proceedings whether or not the Applicants, or growers, have any right to or interest in the assets the subject of the asset sale agreements and hence any interest to protect by the orders made on 27 May 2010.
22 The Applicants' application for an order that the liquidators pay their costs of the proceeding to date should be dismissed. It follows that the Applicants' application that their costs be paid on a full indemnity basis in accordance with Clarendon Lawyers standard terms of engagement should also be dismissed.
(2008) 246 ALR 580
(2008) 37 WAR 516